Dynamic asset trees and portfolio analysis

Jukka-Pekka Onnela, Anirban Chakraborti, Kimmo Kaski, Janos Kertesz

Tutkimustuotos: LehtiartikkeliArticleScientificvertaisarvioitu

122 Sitaatiot (Scopus)

Abstrakti

The minimum spanning tree, based on the concept of ultrametricity, is constructed from the correlation matrix of stock returns and provides a meaningful economic taxonomy of the stock market. In order to study the dynamics of this asset tree we characterise it by its normalised length and by the mean occupation layer, as measured from an appropriately chosen centre called the 'central node'. We show how the tree evolves over time, and how it shrinks strongly, in particular, during a stock market crisis. We then demonstrate that the assets of the optimal Markowitz portfolio lie practically at all times on the outskirts of the tree. We also show that the normalised tree length and the investment diversification potential are very strongly correlated.
AlkuperäiskieliEnglanti
Sivut285-288
JulkaisuEuropean Physical Journal B
Vuosikerta30
Numero3
DOI - pysyväislinkit
TilaJulkaistu - 2002
OKM-julkaisutyyppiA1 Julkaistu artikkeli, soviteltu

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