A cautionary note on computing conditional from unconditional correlations
We show that some care is needed when inferring true unconditional correlations from observed conditional correlations, which is a frequent problem in empirical finance and elsewhere. We give a general formula for the relationship between the two and demonstrate its importance in the context of the bivariate t-distribution.
Year of publication: |
2011
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Authors: | Kaiser, Jonas ; Krämer, Walter |
Published in: |
Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 111.2011, 2, p. 176-179
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Publisher: |
Elsevier |
Subject: | Conditional correlation t-distribution Stock returns |
Saved in:
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