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Social Networks, Asset Allocation and Portfolio Diversification

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Wang_Qiutong.pdf (2.54 MB)

Date

2015-02-18

Authors

Wang, Qiutong

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University of Waterloo

Abstract

In this thesis we consider the problem of choosing financial assets from the equity markets for portfolio construction purposes. We adapt various measures to model the dependence structure among financial assets, taking both the linear and the non-linear relationships into consideration. The dependence structure is reflected by the social networks. We apply the data clustering technique (Frey and Dueck, 2007) to the social networks and study the equity selections based on different dependence measures. The regime switching model (Perlin, 2014) is considered as well in order to identify the changes in the market phases. The performance of the equity selections is evaluated within the mean-variance framework. In addition, we present a diversification analysis of the equity selections with the methodology proposed by Meucci (2009). The numerical tests are applied on three major Chinese equity markets. Through changing the market environment, we acquire a good understanding of the influencing factors for choosing financial assets.

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Keywords

Portfolio Selection, Dependence, Data Clustering, Diversification, Quantitative Finance

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URI

http://hdl.handle.net/10012/9176

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Theses
Statistics and Actuarial Science