By the same authors

From the same journal

From the same journal

Detection of Multiple Structural Breaks in Large Covariance Matrices

Research output: Contribution to journalArticlepeer-review



Publication details

JournalJournal of Business and Economic Statistics
DateAccepted/In press - 2 May 2022
DateE-pub ahead of print (current) - 9 Jun 2022
Early online date9/06/22
Original languageEnglish


This paper studies multiple structural breaks in large contemporaneous covariance matrices of high-dimensional time series satisfying an approximate factor model. The breaks in the second-order moment structure of the common components are due to sudden changes in either factor loadings or covariance of latent factors, requiring appropriate transformation of the factor models to facilitate estimation of the (transformed) common factors and factor loadings via the classical principal component analysis. With the estimated factors and idiosyncratic errors, an easy-to-implement CUSUM-based detection technique is introduced to consistently estimate the location and number of breaks and correctly identify whether they originate in the common or idiosyncratic error components. The algorithms ofWild Binary Segmentation for Covariance (WBS-Cov) and Wild Sparsified Binary Segmentation for Covariance (WSBS-Cov) are used to estimate breaks in the common and idiosyncratic error components, respectively. Under some technical conditions, the asymptotic properties of the proposed methodology are derived with near-optimal rates (up to a logarithmic factor) achieved for the estimated breaks. Monte-Carlo simulation studies are conducted to examine the finite sample performance of the developed method and its comparison with other existing approaches. We finally apply our method to study the contemporaneous covariance structure of daily returns of S&P 500 constituents and identify a few breaks including those occurring during the 2007–2008 financial crisis and the recent coronavirus (COVID-19) outbreak. An R package “BSCOV” is provided to implement the proposed algorithms.

Bibliographical note

© 2022 The Author(s)

Discover related content

Find related publications, people, projects, datasets and more using interactive charts.

View graph of relations