Cluster analysis for portfolio optimization

Preprint English OPEN
Vincenzo Tola; Fabrizio Lillo; Mauro Gallegati; Rosario N. Mantegna;
  • Subject: Physics - Physics and Society | Condensed Matter - Other Condensed Matter | Quantitative Finance - Statistical Finance
    arxiv: Computer Science::Computational Engineering, Finance, and Science | Statistics::Other Statistics | Mathematics::Optimization and Control

We consider the problem of the statistical uncertainty of the correlation matrix in the optimization of a financial portfolio. We show that the use of clustering algorithms can improve the reliability of the portfolio in terms of the ratio between predicted and realized... View more
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