TESTING FOR A CHANGE IN CORRELATION AT AN UNKNOWN POINT IN TIME USING AN EXTENDED FUNCTIONAL DELTA METHOD
Walter Krämer () and
Econometric Theory, 2012, vol. 28, issue 03, 570-589
We propose a new test against a change in correlation at an unknown point in time based on cumulated sums of empirical correlations. The test does not require that inputs are independent and identically distributed under the null. We derive its limiting null distribution using a new functional delta method argument, provide a formula for its local power for particular types of structural changes, give some Monte Carlo evidence on its finite-sample behavior, and apply it to recent stock returns.
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