Clustering Mutual Funds by Return and Risk Levels

TitleClustering Mutual Funds by Return and Risk Levels
Publication TypeWorking Paper
Year of Publication2008
AuthorsF. Lisi, E. Otranto
Number2008_13
Keywordscluster, distance, garch models, risk
Abstract

Mutual funds classifications, often made by rating agencies, are very common and sometimes criticized. In this work, a three-step statistical procedure for mutual funds classification is proposed. In the first step time series funds are characterized in terms of returns. In the second step, a clustering analysis is performed in order to obtain classes of homogeneous funds with respect to the risk levels. In particular, the risk is defined starting from an Asymmetric Threshold-GARCH model aimed to describe minimum, normal and turmoil risk. The third step merges the previous two. An application to 75 European funds belonging to 5 different categories is given.

Citation Key277
AttachmentSize
PDF icon 08-13.pdf178.25 KB