Graphical Models for Financial Time Series and Portfolio Selection
- URL: http://arxiv.org/abs/2101.09214v1
- Date: Fri, 22 Jan 2021 16:56:54 GMT
- Title: Graphical Models for Financial Time Series and Portfolio Selection
- Authors: Ni Zhan, Yijia Sun, Aman Jakhar, He Liu
- Abstract summary: We use PCA-KMeans, autoencoders, dynamic clustering, and structural learning to construct optimal portfolios.
This work suggests that graphical models can effectively learn the temporal dependencies in time series data and are proved useful in asset management.
- Score: 3.444844635251667
- License: http://creativecommons.org/licenses/by/4.0/
- Abstract: We examine a variety of graphical models to construct optimal portfolios.
Graphical models such as PCA-KMeans, autoencoders, dynamic clustering, and
structural learning can capture the time varying patterns in the covariance
matrix and allow the creation of an optimal and robust portfolio. We compared
the resulting portfolios from the different models with baseline methods. In
many cases our graphical strategies generated steadily increasing returns with
low risk and outgrew the S&P 500 index. This work suggests that graphical
models can effectively learn the temporal dependencies in time series data and
are proved useful in asset management.
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