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Multiscale Partial Correlation Clustering of Stock Market Returns
| Content Provider | MDPI |
|---|---|
| Author | Michis, Antonis A. |
| Copyright Year | 2022 |
| Description | 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. |
| Starting Page | 24 |
| e-ISSN | 19118074 |
| DOI | 10.3390/jrfm15010024 |
| Journal | Journal of Risk and Financial Management |
| Issue Number | 1 |
| Volume Number | 15 |
| Language | English |
| Publisher | MDPI |
| Publisher Date | 2022-01-09 |
| Access Restriction | Open |
| Subject Keyword | Journal of Risk and Financial Management Mathematical Social Sciences Stock Market Returns Wavelets Partial Correlation Coefficient Cluster Analysis Portfolio Diversification |
| Content Type | Text |
| Resource Type | Article |
