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Community detection and portfolio optimization

Longfeng Zhao, Chao Wang, Gang-Jin Wang, H. Eugene Stanley and Lin Chen

Papers from arXiv.org

Abstract: Community detection methods can be used to explore the structure of complex systems. The well-known modular configurations in complex financial systems indicate the existence of community structures. Here we analyze the community properties of correlation-based networks in worldwide stock markets and use community information to construct portfolios. Portfolios constructed using community detection methods perform well. Our results can be used as new portfolio optimization and risk management tools.

Date: 2021-12
New Economics Papers: this item is included in nep-net
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