On the application of new tests for structural changes on global minimum-variance portfolios

Dominik Wied, Daniel Ziggel () and Tobias Berens ()

Statistical Papers, 2013, vol. 54, issue 4, 955-975

Abstract: We investigate if portfolios can be improved if the classical Markowitz mean–variance portfolio theory is combined with recently proposed change point tests for dependence measures. Taking into account that the dependence structure of financial assets typically cannot be assumed to be constant over longer periods of time, we estimate the covariance matrix of the assets, which is used to construct global minimum-variance portfolios, by respecting potential change points. It is seen that a recently proposed test for changes in the whole covariance matrix is indeed partially useful whereas pairwise tests for variances and correlations are not suitable for these applications without further adjustments. Copyright Springer-Verlag Berlin Heidelberg 2013

Keywords: Fluctuation test; Markowitz; Portfolio optimization; Structural break; 62P05; 91G10 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (11)

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DOI: 10.1007/s00362-013-0511-4

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