Construction of minimum spanning trees from financial returns using rank correlation
نویسندگان
چکیده
The construction of minimum spanning trees (MSTs) from correlation matrices is an often used method to study relationships in the financial markets. However most work on this topic tends use Pearson coefficient, which relies assumption normality and can be brittle presence outliers, neither ideal for returns. In paper we inference MSTs daily US, UK German returns using two rank methods, Spearman Kendall's $\tau$. constructed these methods tend more stable maintain edges over dataset than those correlation. edge agreement between varies significantly depending state markets, but generally show strong at all times. Deviation univariate related changes difficult connect MSTs. Irrelevant have similar topologies. Portfolios MST a smaller turnover full covariance matrix larger not market. Using bootstrap find that correlations are robust, there little difference robustness
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ژورنال
عنوان ژورنال: Physica D: Nonlinear Phenomena
سال: 2021
ISSN: ['1872-8022', '0167-2789']
DOI: https://doi.org/10.1016/j.physa.2020.125605