A novel portfolio diversification and risk reduction strategy based on affinity propagation clustering algorithm

• Main Authors: LIN,ZHI-TING, 林智婷
• Other Authors: CHEN,AN-BIN
• Format: Others
• Language: zh-TW
• Published: 2016
• Online Access: http://ndltd.ncl.edu.tw/handle/61185905112765890814

碩士 === 國立交通大學 === 資訊管理研究所 === 104 === In this paper, an intelligent portfolio selection method based on Affinity Propagation clustering algorithm is proposed to solve the stable investment problem. The goal of this work is to minimize the volatility of the selected portfolio from the component stocks of S&P 500 index. Each independent stock can be viewed as a node in graph, and the similarity measurements between companies are calculated as the edge weights. Affinity Propagation clustering algorithm solve the graph theory problem by repeatedly update responsibility and availability message passing matrices. This research tried to find most representative and discriminant features to model the stock similarity. The testing features are divided into four major categories, including time-series covariance, technical indicators, previous return information, paired return value. The historical price and trading volume data is used to simulate the portfolio selection and volatility measurement. After grouping these investment targets into a small set of clusters, the selection process will choose fixed number of stocks from different clusters to form the portfolio. The experimental results show that the proposed system can effectively generate more stable portfolio by Affinity Propagation clustering algorithm with proper similarity features than average cases with similar settings.