Abstract:
Taking account of some stylized facts in correlation processes and feasible implementation, a new regime switching dynamic equicorrelation (RS-DEC) model is proposed. Estimate procedures and large sample properties are also provided. RS-DEC model not only deals with high-dimensional correlation, but also takes account for structure break and asymmetry in correlation. In empirical work, we examine the asset allocation on 97 stocks in the Shanghai Stock Exchange. Our model can provide a better fit in sample, and give the information for correlations structure break; Comparing with Na$\ddot{\shortmid}$ve strategy, under Sharpe ratio and minimum standard error criteria, the results show that our model can improve the out-of-sample performance, and significant tests support these conclusions.
潘志远, 毛金龙, 周彬蕊. 高维的相关性建模及其在资产组合中的应用[J]. 金融研究, 2018, 452(2): 190-206.
PAN Zhiyuan, MAO Jinlong, ZHOU Binrui. Modeling High-dimensional Correlation and its Application to Asset Allocation. Journal of Financial Research, 2018, 452(2): 190-206.
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