Construction of Minimum Spanning Trees from Financial Returns using Rank Correlation

@article{Millington2020ConstructionOM,
  title={Construction of Minimum Spanning Trees from Financial Returns using Rank Correlation},
  author={Tristan Millington and Mahesan Niranjan},
  journal={ArXiv},
  year={2020},
  volume={abs/2005.03963}
}
The construction of minimum spanning trees (MSTs) from correlation matrices is an often used method to study relationships in the financial markets. However most of the work on this topic tends to use the Pearson correlation coefficient, which relies on the assumption of normality and can be brittle to the presence of outliers, neither of which is ideal for the study of financial returns. In this paper we study the inference of MSTs from daily US financial returns using Pearson and two rank… Expand
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