Asymmetric Correlations of Equity Portfolios

  title={Asymmetric Correlations of Equity Portfolios},
  author={Andrew Ang and N J Chen},
Correlations between U.S. stocks and the aggregate U.S. market are much greater for downside moves, especially for extreme downside moves, than for upside moves. We develop a new statistic for measuring, comparing, and testing asymmetries in conditional correlations. Conditional on the downside, correlations in the data differ from the conditional correlations implied by a normal distribution by 11.6%. We find that conditional asymmetric correlations are fundamentally different from other… CONTINUE READING
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