A new fluctuation test for constant variances with applications to finance

Dominik Wied, Matthias Arnold (), Nicolai Bissantz () and Daniel Ziggel ()

Metrika: International Journal for Theoretical and Applied Statistics, 2012, vol. 75, issue 8, 1127 pages

Abstract: We present a test to determine whether variances of time series are constant over time. The test statistic is a suitably standardized maximum of cumulative first and second moments. We apply the test to time series of various assets and find that the test performs well in applications. Moreover, we propose a portfolio strategy based on our test which hedges against potential financial crises and show that it works in practice. Copyright Springer-Verlag 2012

Keywords: Econometric modeling; Finance; Portfolio optimization; Structural breaks; Variance (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (17)

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DOI: 10.1007/s00184-011-0371-7

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