Cluster analysis for portfolio optimization
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Publication:844576
DOI10.1016/J.JEDC.2007.01.034zbMATH Open1181.91303arXivphysics/0507006OpenAlexW2019519002MaRDI QIDQ844576FDOQ844576
Authors: Vincenzo Tola, Fabrizio Lillo, Mauro Gallegati, Rosario Nunzio Mantegna 
Publication date: 19 January 2010
Published in: Journal of Economic Dynamics and Control (Search for Journal in Brave)
Abstract: We consider the problem of the statistical uncertainty of the correlation matrix in the optimization of a financial portfolio. We show that the use of clustering algorithms can improve the reliability of the portfolio in terms of the ratio between predicted and realized risk. Bootstrap analysis indicates that this improvement is obtained in a wide range of the parameters N (number of assets) and T (investment horizon). The predicted and realized risk level and the relative portfolio composition of the selected portfolio for a given value of the portfolio return are also investigated for each considered filtering method.
Full work available at URL: https://arxiv.org/abs/physics/0507006
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Classification and discrimination; cluster analysis (statistical aspects) (62H30) Applications of statistics to actuarial sciences and financial mathematics (62P05) Statistical methods; risk measures (91G70) Portfolio theory (91G10)
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Cited In (38)
- Distributed mean reversion online portfolio strategy with stock network
- Portfolio optimization using data analysis techniques
- The optimal portfolio with a modified covariance matrix using the clustering method
- The Confrontation of Two Clustering Methods in Portfolio Management: Ward’s Method Versus DCA Method
- Clustering high-frequency financial time series based on information theory
- Efficient cluster-based portfolio optimization
- Correlation based networks of equity returns sampled at different time horizons
- Inference for vast dimensional elliptical distributions
- Spectral densities of Wishart-Lévy free stable random matrices
- A tail-revisited Markowitz mean-variance approach and a portfolio network centrality
- Crypto price discovery through correlation networks
- Dynamic integration and network structure of the EMU sovereign bond markets
- Clustering of financial time series in risky scenarios
- Naive diversification with fewer assets. A risk reduction approach using clustering methods
- A Krylov subspace approach to large portfolio optimization
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- Semi‐labeled unrooted binary tree optimization subject to nonnegativity
- Uncovering the dynamics of correlation structures relative to the collective market motion
- A review of two decades of correlations, hierarchies, networks and clustering in financial markets
- Network models to improve robot advisory portfolios
- Wavelet evolutionary network for complex-constrained portfolio rebalancing
- Clustering heterogeneous financial networks
- The multiplex dependency structure of financial markets
- A clustering‐based review on project portfolio optimization methods
- Copulas, diagonals, and tail dependence
- High-dimensional realized covariance estimation: a parametric approach
- Clustering and portfolio selection problems: a unified framework
- TOPOLOGICAL PROPERTIES OF BANK NETWORKS: THE CASE OF BRAZIL
- Dynamics of cluster structure in financial correlation matrix
- A combinatorial optimization approach to scenario filtering in portfolio selection
- Feature selection for portfolio optimization
- Clustering financial data for mutual fund management
- Flexible shrinkage in portfolio selection
- Multiple day biclustering of high-frequency financial time series
- Bounding robustness in complex networks under topological changes through majorization techniques
- The joint distribution of stock returns is not elliptical
- On the structure and estimation of hierarchical Archimedean copulas
- A clustering-based portfolio strategy incorporating momentum effect and market trend prediction
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