Multidimensional minimal spanning tree: The Dow Jones case

Juan Brida and Wiston Adrián Risso

Physica A: Statistical Mechanics and its Applications, 2008, vol. 387, issue 21, 5205-5210

Abstract: This paper introduces a new methodology in order to construct Minimal Spanning Trees (MST) and Hierarchical Trees (HT) using the information provided by more than one variable. In fact, the Symbolic Time Series Analysis (STSA) approach is applied to the Dow Jones companies using information not only from asset returns but also for trading volume. The US stock market structure is obtained, showing eight clusters of companies and General Electric as a central node in the tree. We use different partitions showing that the results do not depend on the particular partition. In addition, we apply Monte Carlo simulations suggesting that the tree is not the result of random connections.

Keywords: Symbolic time series analysis; Financial asset returns; Hierarchical tree (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (33)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:387:y:2008:i:21:p:5205-5210

DOI: 10.1016/j.physa.2008.05.009

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