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Authors
Advisor(s)
Abstract(s)
This paper proposes volatility and spectral based methods for the cluster analysis of stock returns. Using the information about both the estimated parameters in the threshold GARCH (or TGARCH) equation and the periodogram of the squared returns, we compute a distance matrix for the stock returns. Clusters are formed by looking to the hierarchical structure tree (or dendrogram) and the computed principal coordinates. We employ these techniques to investigate the similarities and dissimilarities between the ‘blue-chip’ stocks used to compute the Dow Jones Industrial Average (DJIA) index.
Description
Keywords
Asymmetric Effects Cluster Analysis DJIA Stock Returns Periodogram Threshold GARCH Model Volatility
Pedagogical Context
Citation
Caiado, Jorge and Nuno Crato .(2010). “Identifying common dynamic features in stock returns”. Quantitative Finance, Vol. 10, No. 7: pp. 797–807. (Search PDF in 2023)
Publisher
Taylor & Francis