Portfolio creation using graph characteristics

Danko, Jakub; Šoltés, Vincent

doi:10.21511/imfi.15(1).2018.16

Cited by 5 publications

(3 citation statements)

References 14 publications

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“…They use the minimum spanning tree method and also planar maximally filtered graph method (PFG) and construct MST and PFG networks in the US market at different time scales. Danko and Šoltés (2018) use graph characteristics as a stock-picking tool and propose a portfolio while minimizing its standard deviation.…”

Section: Literature Reviewmentioning

confidence: 99%

New Approach to Portfolio Creation Using the Minimum Spanning Tree Theory and Its Robust Evaluation

Danko¹,

Šoltés²,

Bindzár³

2020

QIP Journal

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Purpose: The aim of this paper is to describe another possibility of portfolio creation using the minimum spanning tree method. The research contributes to the existing body of knowledge with using and subsequently developing a new approach based on graph theory, which is suitable for an individual investor who wants to create an investment portfolio.Methodology/Approach: The analyzed data is divided into two (disjoint) sets – a training and a testing set. Portfolio comparisons were carried out during the test period, which always followed immediately after the training period and had a length of one year. For the sake of objectivity of the comparison, all proposed portfolios always consist of ten shares of equal weight.Findings: Based on the results from the analysis, we can see that our proposed method offers (on average) the best appreciation of the invested resources and also the least risky investment in terms of relative variability, what could be considered as very attractive from an individual investor’s point of view.Research Limitation/implication: In our paper, we did not consider any fees related to the purchase and holding of financial instruments in the portfolio. For periods with extreme market returns (sharp increase or decrease), the use of Pearson’s correlation coefficient is not appropriate.Originality/Value of paper: The main practical benefit of the research is that it presents and offers an interesting and practical investment strategy for an individual investor who wants to take an active approach to investment.

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Section: Literature Reviewmentioning

confidence: 99%

New Approach to Portfolio Creation Using the Minimum Spanning Tree Theory and Its Robust Evaluation

Danko¹,

Šoltés²,

Bindzár³

2020

QIP Journal

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“…It is shown that the portfolios of factors describe the information more fully due to the explicit use of input factors. Danko & Šoltés (2018) in their work proposes to form an investment portfolio based on Markowitz theory in combination with graph theory. Testing of the resulting portfolios was carried out using simulation analysis.…”

Section: Literature Reviewmentioning

confidence: 99%

Optimization of investment portfolio management

Oliinyk¹,

Kozmenko²

2019

Serb J Management

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When creating an investment portfolio, certain financial resources are needed. To form an effective portfolio, a financial institution (enterprise) lacks equity funds, and it attracts external investors to use borrowed funds. In a joint investment project, every participant has his own financial interests and determines his strategy of participation in this project. Therefore, external investors invest money in such a project to obtain additional profit as well as the financial institution expects to get the maximum net profit.The purpose of this study is to develop a strategy for creating an investment portfolio and its further management, taking into

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“…The minimum spanning tree (MST) of such networks contains the least correlated stocks in its periphery in contrast to highly correlated stocks in the centre of the tree (Onnela et al, 2003). Using the Markowitz or modern portfolio theory (MPT) (Danko and Šoltés, 2018), the least correlated assets can be selected to build optimal portfolios. MSTs were also used to develop a stock market filtering method to show that the whole market can be simulated by this reduced version (Esfahanipour and Zamanzadeh, 2015).…”

Section: Introductionmentioning

confidence: 99%