Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25000
Year of Publication: 
2007
Series/Report no.: 
Technical Report No. 2007,15
Publisher: 
Universität Dortmund, Sonderforschungsbereich 475 - Komplexitätsreduktion in Multivariaten Datenstrukturen, Dortmund
Abstract: 
This paper introduces a test for zero correlation in situations where the correlation matrix is large compared to the sample size. The test statistic is the sum of the squared correlation coefficients in the sample. We derive its limiting null distribution as the number of variables as well as the sample size converge to infinity. A Monte Carlo simulation finds both size and power for finite samples to be suitable. We apply the test to the vector of default rates, a risk factor in portfolio credit risk, in different sectors of the German economy.
Subjects: 
testing correlation
n-p-asymptotics
portfolio credit risk
JEL: 
C12
C52
Document Type: 
Working Paper

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