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A cautionary note on computing conditional from unconditional correlations
Authors:Jonas Kaiser  Walter Krämer
Institution:
  • Fakultät Statistik, Technische Universität Dortmund, Germany
  • Abstract: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.
    Keywords:C13  C21  C34
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