Asset Subsets Identification via Investment Universe Complex Network

ASAR M. A., ORMAN G. K.

2024 Discovery Science Late Breaking Contributions, DS-LB 2024, Pisa, Italy, 14 - 16 October 2024, vol.3928, (Full Text) identifier

  • Publication Type: Conference Paper / Full Text
  • Volume: 3928
  • City: Pisa
  • Country: Italy
  • Keywords: Complex networks, Dynamic Network Modeling, Financial Networks, Portfolio Allocation
  • Galatasaray University Affiliated: Yes

Abstract

This study seeks to identify an optimal asset subset by ensuring diversity through company description and price behavior over time. We propose the Investment Universe Complex Network (InUCoN) framework, which models the investment universe as a complex network. InUCoN consists of three components: dynamic network generation, snapshot aggregation, and universe filtering. Experiments on S&P stocks demonstrate that InUCoN reduced risk by selecting a more independent stock set, with our proposed portfolio yielding a 32% higher return compared to the unfiltered universe.