Fuzzy cluster analysis and its application on international stock prices

Kaiji Motegi, Kimiaki Shinkai, Hiroaki Uesu, Shuya Kanagawa, Hsunhsun Chung, Kenichi Nagashima

Research output: Chapter in Book/Report/Conference proceedingConference contribution

2 Citations (Scopus)

Abstract

This paper applies fuzzy cluster analysis to investigate co movement of Asian and U.S. stock prices from the viewpoints of both region and industry. Specifically, we analyze daily stock price data of Chinese, Indian, Japanese, South Korean, and U.S. firms from 2005 through 2011. The past literature has never used daily data because of non-synchronous trading times and holidays, but we resolve this problem by analyzing American depositary receipts traded in the New York Stock Exchange instead of underlying shares traded all over the world. Partition trees computed each year provide overwhelming evidence that the country effect always surpasses the industry effect (i.e., shares from the same country tend to move together but shares within the same industry do not). This finding is particularly informative for portfolio managers, choosing a country and then many kinds of industry therein is a riskier strategy than choosing an industry and then many countries. Besides this practical implication, the dominant country effect highlights a slow process of globalization. Nationality of shares should not matter in a globalized world, but there still exist barriers segmenting countries. All these results and implications are robust to different clustering methods, the frequency of data, and foreign exchange rates.

Original languageEnglish
Title of host publicationProceedings - 3rd International Conference on Innovations in Bio-Inspired Computing and Applications, IBICA 2012
Pages34-38
Number of pages5
DOIs
Publication statusPublished - 2012
Externally publishedYes
Event3rd International Conference on Innovations in Bio-Inspired Computing and Applications, IBICA 2012 - Kaohsiung City
Duration: 2012 Sep 262012 Sep 28

Other

Other3rd International Conference on Innovations in Bio-Inspired Computing and Applications, IBICA 2012
CityKaohsiung City
Period12/9/2612/9/28

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Keywords

  • Fuzzy Cluster Analysis
  • Partition Tree
  • Similarity Value
  • Stock Price
  • Ward's Method
  • Zadeh's Method

ASJC Scopus subject areas

  • Bioengineering
  • Software

Cite this

Motegi, K., Shinkai, K., Uesu, H., Kanagawa, S., Chung, H., & Nagashima, K. (2012). Fuzzy cluster analysis and its application on international stock prices. In Proceedings - 3rd International Conference on Innovations in Bio-Inspired Computing and Applications, IBICA 2012 (pp. 34-38). [6337633] https://doi.org/10.1109/IBICA.2012.50