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