Index Hierarchical Structure of Shanghai 50 Stock Based on Minimum Spanning Tree
Hou Tie-shan · Systems Engineering · 2009
Since the commonly-used parameter analysis method is liable to cause the diversity of results in style investment analysis,the method of subdominant ultra-metric space is introduced to the study of style investment.Subdominant ultra-metric space is provided with the exactly defined topology sequence,and corresponded with index hierarchical structure and style.Firstly,the distance between stocks are calculated by using prices of stocks,and subdominant ultra-metric space by associating the minimum spanning tree of portfolio.Secondly,the subdominant ultra-metric space to the chart of index hierarchical structure is transformed,and finally the distribution of style is gained.Using sample of Shanghai Stock 50 Index from 2004 to 2007,the demonstration result shows that style of industry is more prominent horizontally,especially in the bank and steel industries.The style of region and cross holding also exists.And after the reform of non-tradable shares,style of industry becomes more obvious vertically and more other styles also occur.It turns out that minimum spanning tree is valid,which would be helpful for collocating portfolio,improving yield of investment and avoiding systemic risk.