摘要：This paper calculates the per quarter pairwise correlation coefficients (Rho) of the daily returns from December 5, 2005 to December 8, 2014 of 30 stocks randomly selected from the Russell 3000 index. For the time series correlation coefficients of 435 pairs of assets, we employ the Elliot-Rothenberg-Stock Point Optimal procedure to examine the stability of correlation coefficients. Our results indicate the inappropriateness of using correlation coefficients in portfolio management and Monte Carlo simulation. More than one-third of the correlation coefficient series generate non-asymptotic simulation volatility and using ex post correlation coefficients in Cholesky decomposition performance forecast can lead to severe deviation from the investment policy mandate.
关键词：Correlation Coefficient;Cholesky Decomposition;Portfolio Risk;Monte Carlo
