Visualization of a Stock Market Correlation Matrix

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dc.contributor.authorRea, A.
dc.contributor.authorRea, W.
dc.date.accessioned2014-06-23T23:36:35Z
dc.date.available2014-06-23T23:36:35Z
dc.date.issued2014en
dc.descriptionAccepted by editor 4-Jan-2014<br />en
dc.description.abstractThis paper presents a novel application of Neighbor-Net, a clustering algorithm developed for constructing a phylogenetic network in the field of evolutionary biology, to visualizing a correlation matrix. We apply Neighbor-Net as implemented in the SplitsTree software package to 48 stocks listed on the New Zealand Stock Exchange. We show that by visualizing the correlation matrix using a Neighbor-Net splits graph and its associated circular ordering of the stocks that some of the problems associated with understanding the large number of correlations between the individual stocks can be overcome. We compare the visualization of Neighbor-Net with that provided by hierarchical clustering trees and minimum spanning trees. The use of Neighbor-Net networks, or splits graphs, yields greater insight into how closely individual stocks are related to each other in terms of their correlations and suggests new avenues of research into how to construct small diversified stock portfolios.en
dc.identifier.citationRea, A., Rea, W. (2014) Visualization of a Stock Market Correlation Matrix. Physica A: Statistical Mechanics and its Applications, 400, pp. 109-123.en
dc.identifier.doihttps://doi.org/10.1016/j.physa.2014.01.017
dc.identifier.urihttp://hdl.handle.net/10092/9310
dc.language.isoen
dc.publisherUniversity of Canterbury. Department of Economics and Financeen
dc.publisherUniversity of Canterbury. Mathematics and Statisticsen
dc.rights.urihttps://hdl.handle.net/10092/17651en
dc.subjectVisualizationen
dc.subjectNeighbor-Netsen
dc.subjectCorrelation Matrixen
dc.subjectMinimum Spanning Treesen
dc.subjectHierarchical Clustering Treesen
dc.subject.anzsrcFields of Research::38 - Economics::3801 - Applied economics::380107 - Financial economicsen
dc.subject.anzsrcFields of Research::38 - Economics::3803 - Economic theory::380303 - Mathematical economicsen
dc.titleVisualization of a Stock Market Correlation Matrixen
dc.typeJournal Article
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