Multiscale Partial Correlation Clustering of Stock Market Returns

Journal of Risk and Financial Management

Antonis A. Michis¹ 

[1] Central Bank of Cyprus, 1395 Nicosia, Cyprus;

关键词: stock market returns;    wavelets;    partial correlation coefficient;    cluster analysis;    portfolio diversification;   

DOI  :  10.3390/jrfm15010024

来源: DOAJ

【 摘 要 】

This study proposes a wavelet procedure for estimating partial correlation coefficients between stock market returns over different time scales. The estimated partial correlations are subsequently used in a cluster analysis to identify, for each time scale, groups of stocks that exhibit distinct market movement characteristics and are therefore useful for portfolio diversification. The proposed procedure is demonstrated using all the major S&P 500 sector indices as well as precious metals and energy sector futures returns during the last decade. The results suggest cluster formations that vary by time scale, which entails different stock selection strategies for investors differing in terms of their investment horizon orientation.

【 授权许可】

Unknown