Portfolios and the Market Geometry

Physica A 410 (2014) 226–235

10 Pages Posted: 27 Jan 2015  

Samuel Eleutério

Instituto Superior Técnico (IST)

Tanya Araújo

UECE - Research Unit on Complexity in Economics

Rui Vilela Mendes

CMAF, Complexo Interdisciplinar UL and IPFN, Instituto Superior Técnico

Date Written: January 25, 2015

Abstract

A geometric analysis of return time series, performed in the past, implied that most of the systematic information in 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 companies that have the largest projections in each one of the subspaces. As expected, it was found that the best performance portfolios are associated with some of the small eigenvalue subspaces and not to the dominant dimensions. This is found to occur in a systematic fashion over an extended period (1990–2008).

Suggested Citation

Eleutério, Samuel and Araújo, Tanya and Mendes, Rui Vilela, Portfolios and the Market Geometry (January 25, 2015). Physica A 410 (2014) 226–235. Available at SSRN: https://ssrn.com/abstract=2555188

Samuel Eleutério

Instituto Superior Técnico (IST)

Av. Rovisco Pais
Lisboa, 1049-001
Portugal

Tanya Araújo

UECE - Research Unit on Complexity in Economics ( email )

ISEG/UTL, Rua Miguel Lupi 20
Lisboa, 1249-078
Portugal

Rui Vilela Mendes (Contact Author)

CMAF, Complexo Interdisciplinar UL and IPFN, Instituto Superior Técnico ( email )

Av. Rovisco Pais
Lisboa, 1049-001
Portugal

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