The Influence of Changes in Asset Volatilities and Correlations on Minimum Variance Portfolio Risk
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چکیده
This paper makes a number of contributions to the understanding of minimum variance portfolio (MVP) risk. First, it presents several results connecting changes in MVP risk to changes in portfolio asset volatilities and correlations. Second, it explores the efficacy of three alternative methods of attributing changes in MVP risk to either changes in asset volatility or changes in asset correlations. Lastly, Dow Jones stocks are employed to empirically measure the relative importance of changes these two influences to the dynamics of MVP risk during the period 2001 to 2010 with particular emphasis on the financial crisis years 2008 and 2009.
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