We assess the ability of minimum-variance portfolio allocation strategies accounting for time-varying correlation between assets to provide performance benefits relative to an equally-weighted portfolio. Prior to transaction costs correlation-based strategies emphatically outperform the...

The asset allocation decision often relies upon correlation estimates arising from short-run data. Short-run correlation estimates may, however, be distorted by frictions. In this paper, we introduce a long-run wavelet-based correlation estimator, distinguishing between long-run common behavior...