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Testing the Change in Correlation Structure across Markets : High-Dimensional Data

Author

Listed:
  • Saparya Suresh

    (Indian Institute of Management Kozhikode)

  • Malay Bhattacharya

    (Indian Institute of Management Bangalore)

Abstract

The Correlation Structure associated with a portfolio is subjected to vary across time. Studying the structural breaks in the time dependent Correlation matrix associated with a portfolio had been a subject of inter- est for a better understanding of the market movements, portfolio selection etc. The current paper proposes a methodology for testing the change in time dependent correlation structure of a portfolio in the high dimensional data using the techniques of generalised inverse, singular valued decompo- sition and multivariate distribution theory which has not been addressed so far. The asymptotic properties of the proposed test are derived. Also, the performance and the validity of the method is tested on real data set.

Suggested Citation

  • Saparya Suresh & Malay Bhattacharya, 2021. "Testing the Change in Correlation Structure across Markets : High-Dimensional Data," Working papers 411, Indian Institute of Management Kozhikode.
    • Handle: RePEc:iik:wpaper:411
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