The instability of the correlation structure of the S&P 500

Using weekly returns of S&P 500 constituents, we study the time-varying correlation structure during the period of 2006 to mid-2011. Contrary to most of the previous correlation studies of many assets, we do not use rolling correlations but the DCC MV-GARCH model with the MacGyver strategy proposed by Engle (2009). We find empirical evidence that the correlation structure tends to change significantly during the periods of high volatility and market downturns.