A Nonparametric Test for a Constant Correlation Matrix

Forthcoming in Econometric Reviews

29 Pages Posted: 19 Jan 2014 Last revised: 30 Oct 2014

Date Written: October 29, 2014


We propose a nonparametric procedure to test for changes in correlation matrices at an unknown point in time. The new test requires constant expectations and variances, but only mild assumptions on the serial dependence structure and has considerable power in finite samples. We derive the asymptotic distribution under the null hypothesis of no change as well as local power results and apply the test to stock returns.

Keywords: Fluctuation test; Functional delta method; Gaussian process; Local power

JEL Classification: C12, C14, C32, C58

Suggested Citation

Wied, Dominik, A Nonparametric Test for a Constant Correlation Matrix (October 29, 2014). Forthcoming in Econometric Reviews, Available at SSRN: https://ssrn.com/abstract=2372748 or http://dx.doi.org/10.2139/ssrn.2372748

Dominik Wied (Contact Author)

University of Cologne ( email )

Cologne, 50923

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