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Ultrametricity in fund of funds diversification

Listed author(s):
  • Miceli, M.A.
  • Susinno, G.

Minimum market transparency requirements impose hedge fund (HF) managers to use the statement declared strategy in practice. However, each declared strategy may actually generate a multiplicity of implemented management decisions. Is then the “actual ” strategy the same as the “announced” strategy? Can the actual strategy be monitored or compared to the actual strategy of HF belonging to the same “announced” class? Can the announced or actual strategy be used as a quantitative argument in the fund of funds policy? With the appropriate metric, it is possible to draw a minimum spanning tree (MST) to emphasize the similarity structure that could be hidden in the raw correlation matrix of HF returns.

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Article provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.

Volume (Year): 344 (2004)
Issue (Month): 1 ()
Pages: 95-99

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Handle: RePEc:eee:phsmap:v:344:y:2004:i:1:p:95-99
DOI: 10.1016/j.physa.2004.06.094
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  1. R. Mantegna, 1999. "Hierarchical structure in financial markets," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 11(1), pages 193-197, September.
  2. V. Plerou & P. Gopikrishnan & B. Rosenow & L. A. N. Amaral & T. Guhr & H. E. Stanley, 2001. "A Random Matrix Approach to Cross-Correlations in Financial Data," Papers cond-mat/0108023,
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