Related papers: Risk diversification: a study of persistence with …
Network theory proved recently to be useful in the quantification of many properties of financial systems. The analysis of the structure of investment portfolios is a major application since their eventual correlation and overlap impact the…
We quantify the amount of information filtered by different hierarchical clustering methods on correlations between stock returns comparing it with the underlying industrial activity structure. Specifically, we apply, for the first time to…
We discovered that past changes in the market correlation structure are significantly related with future changes in the market volatility. By using correlation-based information filtering networks we device a new tool for forecasting the…
We analyze the stability of financial investment networks, where financial institutions hold overlapping portfolios of assets. We consider the effect of portfolio diversification and heterogeneous investments using a random matrix dynamical…
This paper focuses on a dynamic multi-asset mean-variance portfolio selection problem under model uncertainty. We develop a continuous time framework for taking into account ambiguity aversion about both expected return rates and…
We investigate the tendency for financial instruments to form clusters when there are multiple factors influencing the correlation structure. Specifically, we consider a stock portfolio which contains companies from different industrial…
We study how to assess the potential benefit of diversifying an equity portfolio by investing within and across equity sectors. We analyse 20 years of US stock price data, which includes the global financial crisis (GFC) and the COVID-19…
Traded corporations are required by law to have a majority of outside directors on their board. This requirement allows the existence of directors who sit on the board of two or more corporations at the same time, generating what is…
The problem of portfolio management represents an important and challenging class of dynamic decision making problems, where rebalancing decisions need to be made over time with the consideration of many factors such as investors…
We study soft persistence (existence in subsequent temporal layers of motifs from the initial layer) of motif structures in Triangulated Maximally Filtered Graphs (TMFG) generated from time-varying Kendall correlation matrices computed from…
The question of how to stabilize financial systems has attracted considerable attention since the global financial crisis of 2007-2009. Recently, Beale et al. ("Individual versus systemic risk and the regulator's dilemma", Proc Natl Acad…
In this brief review, we critically examine the recent work done on correlation-based networks in financial systems. The structure of empirical correlation matrices constructed from the financial market data changes as the individual stock…
We apply a method to filter relevant information from the correlation coefficient matrix by extracting a network of relevant interactions. This method succeeds to generate networks with the same hierarchical structure of the Minimum…
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…
We report evidence of a deep interplay between cross-correlations hierarchical properties and multifractality of New York Stock Exchange daily stock returns. The degree of multifractality displayed by different stocks is found to be…
The recent financial crisis has stressed the need to understand financial systems as networks of interdependent countries, where cross-border financial linkages play the fundamental role. It has also been emphasized that the relevance of…
We propose here a multiplex network approach to investigate simultaneously different types of dependency in complex data sets. In particular, we consider multiplex networks made of four layers corresponding respectively to linear,…
Understanding the dependence structure of asset returns is fundamental in risk assessment and is particularly relevant in a portfolio diversification strategy. We propose a clustering approach where evidence accumulated in a multiplicity of…
Geographic diversification is fundamental to risk mitigation among investors and insurers of housing, mortgages, and mortgage-related derivatives. To characterize diversification potential, we provide estimates of integration, spatial…
It is widely believed that fractality of complex networks origins from hub repulsion behaviors (anticorrelation or disassortativity), which means large degree nodes tend to connect with small degree nodes. This hypothesis was demonstrated…