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Monitoring multivariate variance changes

Author

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  • Pape, Katharina
  • Wied, Dominik
  • Galeano, Pedro

Abstract

We propose a model-independent multivariate sequential procedure to monitor changes in the vector of componentwise unconditional variances in a sequence of p-variate random vectors. The asymptotic behavior of the detector is derived and consistency of the procedure stated. A detailed simulation study illustrates the performance of the procedure confronted with different types of data generating processes. We conclude with an application to the log returns of a group of DAX listed assets.

Suggested Citation

  • Pape, Katharina & Wied, Dominik & Galeano, Pedro, 2016. "Monitoring multivariate variance changes," Journal of Empirical Finance, Elsevier, vol. 39(PA), pages 54-68.
  • Handle: RePEc:eee:empfin:v:39:y:2016:i:pa:p:54-68
    DOI: 10.1016/j.jempfin.2016.08.007
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    References listed on IDEAS

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    More about this item

    Keywords

    Multivariate sequences; Online detection; Threshold function; Variance changes;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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