publication . Other literature type . Research . 2015 . Embargo end date: 03 Sep 2015

Testing for structural changes in large portfolios

Posch, Peter N.; Ullmann, Daniel; Wied, Dominik;
Open Access English
  • Published: 01 Jan 2015
  • Publisher: Technische Universität Dortmund
  • Country: Germany
Model free tests for constant parameters often fail to detect structural changes in high dimensions. In practice, this corresponds to a portfolio with many assets and a reasonable long time series. We reduce the dimensionality of the problem by looking a compressed panel of time series obtained by cluster analysis and the principal components of the data. Using our methodology we are able to extend a test for a constant correlation matrix from a sub portfolio to whole indices and exemplify the procedure with the EuroStoxx index.
free text keywords: correlation, portfolio management, cluster analysis, structural change, 310, 330, 620, info:eu-repo/classification/ddc/310, info:eu-repo/classification/ddc/330, info:eu-repo/classification/ddc/620
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