Google search volumes for portfolio management: performances and asset concentration

• S.I.: Recent Developments in Financial Modeling and Risk Management
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Notes

1. Potentially, the situation can be even more severe. Consider, for example, the joint download of “Pfizer” and “The Home Depot”, where the GI of “Pfizer” is flattened to 1, losing all relative and dynamical information.

2. Kristoufek (2015) proposes a comparison between the use of web search volumes in-sample and out-of-sample. In this paper, we only consider the so called out-of-sample analysis, which is appropriate to build an asset allocation rule.

3. Recall that the Gini coefficient is a concentration measure widely used in economics and statistics, principally to analyze income inequalities (see Gini 2005). The Gini coefficient ranges from 0 (perfect equality: all the individuals have the same income) to 1 (maximum concentration: 1 individual earns all the income in the economy). In this paper, we use the Gini coefficient as a portfolio concentration measure. This way, we have an indicator of the diversification of the considered portfolios. Here and in the following, we report the Gini coefficient of the average portfolio weights on the considered period: $$\mathrm {Gini}\left( \frac{1}{T}\sum _{t=1}^T w_t\right)$$, where $$w_t$$ is the vector of the portfolio weights at time $$t$$.

4. Remark that the Gini coefficient of the weights of common stock indexes is around 0.5 or below.

5. The qualitative behavior of the indicators for $$k=4,5,6$$ is similar to the one with $$k=3$$. For the sake of interest and space, we do not report the results for such values of $$k$$, although they are available upon request.

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Acknowledgements

We would like to thank two anonymous Referees for their useful suggestions that helped us to improve the paper.

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Correspondence to Mario Maggi.

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Maggi, M., Uberti, P. Google search volumes for portfolio management: performances and asset concentration. Ann Oper Res 299, 163–175 (2021). https://doi.org/10.1007/s10479-019-03424-7