Weiß, Gregor N.F.
|Title:||Testing for structural breaks in correlation|
|Other Titles:||Does it improve Value-at-Risk forecasting?|
|Abstract:||In this paper, we compare the Constant Conditional Correlation (CCC) model to its dynamic counterpart, the Dynamic Conditional Correlation (DCC) model with respect to its accuracy for forecasting the Value-at-Risk of financial portfolios. Additionally, we modify these benchmark models by combining them with a pairwise test for constant correlations, a test for a constant correlation matrix, and a test for a constant covariance matrix. In an empirical horse race of these models based on five- and ten-dimensional portfolios, our study shows that the plain CCC- and DCC-GARCH models are outperformed in several settings by the approaches modified by tests for structural breaks in asset correlations and covariances.|
|Appears in Collections:||Sonderforschungsbereich (SFB) 823|
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|DP_2113_SFB823_Berens_Weiss_Wied.pdf||DNB||497.11 kB||Adobe PDF||View/Open|
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