Using Economic and Financial Information for Stock Selection
AbstractA major inconvenience of the traditional approach in portfolio choice, based upon historical information, is its inability to anticipate sudden changes of price tendencies. Introducing information about future behavior of the assets fundamentals may help to make more appropriate choices. However the specification and parameterization of a model linking this exogenous information to the asset prices is not straightforward. Classification trees can be used to construct partitions of assets of forecasted similar behavior. We analyze the performance of this approach and apply it to different sectors of the S&P500.
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Bibliographic InfoPaper provided by Swiss Finance Institute in its series Swiss Finance Institute Research Paper Series with number 06-21.
Length: 20 pages
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Portfolio optimization; Decision trees; Factor models;
Other versions of this item:
- I. Roko & M. Gilli, 2008. "Using economic and financial information for stock selection," Computational Management Science, Springer, vol. 5(4), pages 317-335, October.
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
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