Robust monitoring of CAPM portfolio betas

In this work, we extend our study in Chochola et?al. 7 and propose some robust sequential procedure for the detection of structural breaks in a Functional Capital Asset Pricing Model (FCAPM). The procedure is again based on M -estimates and partial weighted sums of M -residuals and "robustifies" the approach of Aue et?al. 3, in which ordinary least squares (OLS) estimates have been used. Similar to Aue et?al. 3, and in contrast to Chochola et?al. 7, high-frequency data can now also be taken into account. The main results prove some null asymptotics for the suggested test as well as its consistency under local alternatives. In addition to the theoretical results, some conclusions from a small simulation study together with an application to a real data set are presented in order to illustrate the finite sample performance of our monitoring procedure.

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