Title :
Hierarchical Agglomerative Clustering Based T-outlier Detection
Author :
Wang, Dajun ; Fortier, Paul J. ; Michel, Howard E. ; Mitsa, Theophano
Author_Institution :
Fidelity Investments, Massachusetts Univ., Dartmouth, MA
Abstract :
Diversification is a technique to reduce portfolio volatility. In traditional financial domains, the correlation coefficient has been used as a basis for diversification. However, it is problematic in reality since it only captures a single dimension. This research introduces a unique similarity based framework to identify outliers among high dimensional time series objects in financial markets. As the similarity between two assets decreases in the portfolio, the benefits of diversification increase. The paper proposes an efficient hierarchical agglomerative clustering (HAC) algorithm based on vertical and horizontal dimension reduction algorithms. Finally, this paper proposes a unique similarity measurement definition/calculation based on the time-value function. This paper discloses a series of experiment results illustrating the effectiveness of the framework. The detected outliers can be used to monitor portfolio diversification and therefore mitigate risk
Keywords :
data analysis; financial management; pattern clustering; risk analysis; time series; T-outlier detection; financial markets; hierarchical agglomerative clustering; high dimensional time series; horizontal dimension reduction algorithm; portfolio diversification; portfolio volatility; risk mitigation; similarity measurement; time-value function; vertical dimension reduction algorithm; Algorithm design and analysis; Clustering algorithms; Covariance matrix; Data mining; Investments; Monitoring; Object detection; Piecewise linear techniques; Portfolios; Security;
Conference_Titel :
Data Mining Workshops, 2006. ICDM Workshops 2006. Sixth IEEE International Conference on
Conference_Location :
Hong Kong
Print_ISBN :
0-7695-2702-7
DOI :
10.1109/ICDMW.2006.91