CRITERIA OF PORTFOLIO FORMATION OF STOCKS THROUGH HIERARCHICAL CLUSTERS

Authors

  • Pierre Lucena Universidade Federal de Pernambuco
  • Antonio Carlos Figueiredo Pinto Universidade Pontifícia Universidade Católica do Rio de Janeiro
  • Gerson Lachtermacher Fundação Getulio Vargas/Universidade do Estado do Rio de Janeiro

Abstract

This paper has as main objective to present and to test a tool of multivariate statistics

in financial models. This methodology, known as clusters analysis, separates the observations in groups through its determined characteristic, in contrast of the traditional methodology, which is only the order through quantiles. This tool was applied in 213 shares negotiated in the São Paulo Stock Exchange (Bovespa), separating to the groups for size and book-to-market. Later, the new portfolios were applied in the Fama and French Model (1996), comparing the results in a portfolio formation for quintiles and for cluster analysis. Better results were found in the second methodology. The authors conclude that the cluster analysis can be more adequate, because tends to form more homogeneous groups, being useful its application for portfolio formation, and for financial theory.

KEYWORDS: Quantiles; Cluster analysis; Data Mining; Anomalies; Fama and French model.

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Author Biographies

Pierre Lucena, Universidade Federal de Pernambuco

Doutor em Administração/Finanças pelo Programa de Pós-Graduação em Administração de Empresas da Pontifícia Universidade Católica do Rio de Janeiro.

Professor do Centro de Ciências Sociais Aplicadas da Universidade Federal de Pernambuco.

Antonio Carlos Figueiredo Pinto, Universidade Pontifícia Universidade Católica do Rio de Janeiro

 Doutor em Administração/Finanças pelo Programa de Pós-Graduação em Administração de Empresas da Pontifícia Universidade Católica do Rio de Janeiro.

Gerson Lachtermacher, Fundação Getulio Vargas/Universidade do Estado do Rio de Janeiro

PhD em Management Sciences pelo  Department of Management Sciences da Faculty of Engineering da University of Waterloo 

Professor da Escola de Administração e Economia da Fundação Getúlio Vargas e da Faculdade de Ciências Econômicas da Universidade do Estado  do Rio de Janeiro

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Published

2010-01-11

Issue

Vol. 11 No. 2 (2010)

Section

Strategic Finances

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