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Portfolios and the market geometry

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Author Info

  • Samuel Eleutério
  • Tanya Araújo
  • R. Vilela Mendes

Abstract

A geometric analysis of the time series of returns has been performed in the past and it implied that the most of the systematic information of the market is contained in a space of small dimension. Here we have explored subspaces of this space to find out the relative performance of portfolios formed from the companies that have the largest projections in each one of the subspaces. It was found that the best performance portfolios are associated to some of the small eigenvalue subspaces and not to the dominant directions in the distances matrix. This occurs in such a systematic fashion over an extended period (1990-2008) that it may not be a statistical accident.

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File URL: http://pascal.iseg.utl.pt/~depeco/wp/wp092012.pdf
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Bibliographic Info

Paper provided by ISEG - School of Economics and Management, Department of Economics, University of Lisbon in its series Working Papers Department of Economics with number 2012/09.

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Date of creation: Feb 2012
Date of revision:
Handle: RePEc:ise:isegwp:wp092012

Contact details of provider:
Postal: Department of Economics, ISEG - School of Economics and Management, University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL
Web page: https://aquila1.iseg.ulisboa.pt/aquila/departamentos/EC

Related research

Keywords: Return correlations; Market Geometry; Portfolios;

This paper has been announced in the following NEP Reports:

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