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A hybrid approach to combining CART and logistic regression for stock ranking

Zhu, Min, Philpotts, David, Sparks, Ross, & Stevenson, Maxwell J. (2011) A hybrid approach to combining CART and logistic regression for stock ranking. The Journal of Portfolio Management, 38(1), pp. 100-109.

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    Abstract

    The benefits of applying tree-based methods to the purpose of modelling financial assets as opposed to linear factor analysis are increasingly being understood by market practitioners. Tree-based models such as CART (classification and regression trees) are particularly well suited to analysing stock market data which is noisy and often contains non-linear relationships and high-order interactions. CART was originally developed in the 1980s by medical researchers disheartened by the stringent assumptions applied by traditional regression analysis (Brieman et al. [1984]). In the intervening years, CART has been successfully applied to many areas of finance such as the classification of financial distress of firms (see Frydman, Altman and Kao [1985]), asset allocation (see Sorensen, Mezrich and Miller [1996]), equity style timing (see Kao and Shumaker [1999]) and stock selection (see Sorensen, Miller and Ooi [2000])...

    Impact and interest:

    1 citations in Scopus
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    1 citations in Web of Science®

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    ID Code: 54042
    Item Type: Journal Article
    Keywords: CART, stock selection
    DOI: 10.3905/jpm.2011.38.1.100
    ISSN: 0095-4918
    Subjects: Australian and New Zealand Standard Research Classification > ECONOMICS (140000)
    Divisions: Current > QUT Faculties and Divisions > QUT Business School
    Current > Schools > School of Economics & Finance
    Copyright Owner: Copyright 2011 Institutional Investor Journals
    Deposited On: 10 Oct 2012 09:56
    Last Modified: 13 Oct 2012 02:12

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