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Stock Selection as a Problem in Phylogenetics—Evidence from the ASX

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  • Cheng Juan Zhan

    (Department of Economics and Finance, University of Canterbury, Christchurch 8140, New Zealand)

  • William Rea

    (Department of Economics and Finance, University of Canterbury, Christchurch 8140, New Zealand)

  • Alethea Rea

    (Data Analysis Australia, Perth 6009, Australia)

Abstract

We report the results of fifteen sets of portfolio selection simulations using stocks in the ASX200 index for the period May 2000 to December 2013. We investigated five portfolio selection methods, random selection, selection within industrial groups, and three based on neighbor-Net phylogenetic networks. We report that using random, industrial groups, or neighbor-Net phylogenetic networks alone rarely produced statistically significant reduction in risk, though in four out of the five cases in which it did so, the portfolios selected using the phylogenetic networks had the lowest risk. However, we report that when using the neighbor-Net phylogenetic networks in combination with industry group selection that substantial reductions in portfolio return spread were achieved.

Suggested Citation

  • Cheng Juan Zhan & William Rea & Alethea Rea, 2016. "Stock Selection as a Problem in Phylogenetics—Evidence from the ASX," IJFS, MDPI, vol. 4(4), pages 1-19, September.
    • Handle: RePEc:gam:jijfss:v:4:y:2016:i:4:p:18-:d:79462
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    More about this item

    Keywords

    stock selection; ASX200; neighbor-Net networks; portfolio risk;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance
    • F2 - International Economics - - International Factor Movements and International Business
    • F3 - International Economics - - International Finance
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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