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Dynamic asset trees and portfolio analysis
Open accessAbstract
Abstract: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.
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Citations
Cited by
Fortunato, S. (2010) · Physics Reports · doi:10.1016/j.physrep.2009.11.002 · Cited by 11,293
Intensity and coherence of motifs in weighted complex networks
Onnela, J.-P., Saramäki, J., Kertész, J., & Kaski, K. (2005) · Physical Review E · doi:10.1103/physreve.71.065103 · Cited by 1,112
Self-citationDynamics of market correlations: Taxonomy and portfolio analysis
Onnela, J.-P., Chakraborti, A., Kaski, K., Kertész, J., & Kanto, A. (2003) · Physical Review E · doi:10.1103/physreve.68.056110 · Cited by 767
Self-citationAlexander-Bloch, A. F., Gogtay, N., Meunier, D., Birn, R., Clasen, L., Lalonde, F., Lenroot, R., Giedd, J., & Bullmore, E. T. (2010) · Frontiers in Systems Neuroscience · doi:10.3389/fnsys.2010.00147 · Cited by 480
Networks of equities in financial markets
Bonanno, G., Caldarelli, G., Lillo, F., Miccich�, S., Vandewalle, N., & Mantegna, R. N. (2004) · The European Physical Journal B - Condensed Matter · doi:10.1140/epjb/e2004-00129-6 · Cited by 403
Metadata
- Authors
- Onnela, J.-P., Chakraborti, A., Kaski, K., & Kertiész, J.
- Venue
- The European Physical Journal B - Condensed Matter
- Published
- 2002-12-01
- Volume
- 30
- Issue
- 3
- Pages
- 285-288
- ISSN
- 1434-6028 (ISSN-L)
- 1434-6036
- OpenAlex
- W2118420968
- Cited by
- 193
- References
- 0
- FWCI
- 10.37
- Type
- journal article
- Language
- en
- Open access
- green
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- Onnela, J.-P., Chakraborti, A., Kaski, K., & Kertiész, J. (2002). Dynamic asset trees and portfolio analysis. The European Physical Journal B - Condensed Matter. https://doi.org/10.1140/epjb/e2002-00380-9
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
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