| A cautionary note on computing conditional from unconditional correlations (2009) | |||||||||||||
Abstract | |||||||||||||
| We show that some care should be exercised 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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