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Combining random forest and copula functions: A heuristic approach for selecting assets from a financial crisis perspective

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  • Giovanni De Luca
  • Giorgia Rivieccio
  • Paola Zuccolotto

Abstract

In this paper we propose a heuristic strategy aimed at selecting and analysing a set of financial assets, focusing attention on their multivariate tail dependence structure. The selection, obtained through an algorithmic procedure based on data mining tools, assumes the existence of a reference asset we are specifically interested to. The procedure allows one to opt for two alternatives: to prefer those assets exhibiting either a minimum lower tail dependence or a maximum upper tail dependence. The former could be a recommendable opportunity in a financial crisis period. For the selected assets, the tail dependence coefficients are estimated by means of a proper multivariate copula function. Copyright © 2010 John Wiley & Sons, Ltd.

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  • Giovanni De Luca & Giorgia Rivieccio & Paola Zuccolotto, 2010. "Combining random forest and copula functions: A heuristic approach for selecting assets from a financial crisis perspective," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 17(2), pages 91-109, April.
    • Handle: RePEc:wly:isacfm:v:17:y:2010:i:2:p:91-109
    DOI: 10.1002/isaf.315
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    References listed on IDEAS

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