Correlation, hierarchies, and networks in financial markets

Economy – Quantitative Finance – Statistical Finance

Scientific paper

Rate now

  [ 0.00 ] – not rated yet Voters 0   Comments 0

Details

37 pages, 9 figures, 3 tables

Scientific paper

10.1016/j.jebo.2010.01.004

We discuss some methods to quantitatively investigate the properties of correlation matrices. Correlation matrices play an important role in portfolio optimization and in several other quantitative descriptions of asset price dynamics in financial markets. Specifically, we discuss how to define and obtain hierarchical trees, correlation based trees and networks from a correlation matrix. The hierarchical clustering and other procedures performed on the correlation matrix to detect statistically reliable aspects of the correlation matrix are seen as filtering procedures of the correlation matrix. We also discuss a method to associate a hierarchically nested factor model to a hierarchical tree obtained from a correlation matrix. The information retained in filtering procedures and its stability with respect to statistical fluctuations is quantified by using the Kullback-Leibler distance.

No associations

LandOfFree

Say what you really think

Search LandOfFree.com for scientists and scientific papers. Rate them and share your experience with other people.

Rating

Correlation, hierarchies, and networks in financial markets does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.

If you have personal experience with Correlation, hierarchies, and networks in financial markets, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Correlation, hierarchies, and networks in financial markets will most certainly appreciate the feedback.

Rate now

     

Profile ID: LFWR-SCP-O-712848

  Search
All data on this website is collected from public sources. Our data reflects the most accurate information available at the time of publication.