Reports of Conferences,Institutes, and Seminars

This quarter's column features a report from the Association of College and Research Libraries (ACRL) Conference, held April 10–13, in Indianapolis, IN, and a workshop titled, “Developing Issues in Licensing: Text Mining, MOOCs, and More,” which was co-sponsored by the Collection Development and Electronic Resources Management Interest Groups of the Association of College and Research Libraries New England Chapter (ACRL/NEC), an independent chapter of ACRL, and which took place April 25, 2013 at Northeastern University in Boston, MA.     

Dynamic Equicorrelation

A new covariance matrix estimator is proposed under the assumption that at every time period all pairwise correlations are equal. This assumption, which is pragmatically applied in various areas of finance, makes it possible to estimate arbitrarily large covariance matrices with ease. The model, called DECO, involves first adjusting for individual volatilities and then estimating correlations. A quasi-maximum likelihood result shows that DECO provides consistent parameter estimates even when the equicorrelation assumption is violated. We demonstrate how to generalize DECO to block equicorrelation structures. DECO estimates for U.S. stock return data show that (block) equicorrelated models can provide a better fit of the data than DCC. Using out-of-sample forecasts, DECO and Block DECO are shown to improve portfolio selection compared to an unrestricted dynamic correlation structure.