Correlations and Clustering in the Trading of Membersof the London Stock Exchange

Posted: 24 Jun 2008

See all articles by J. Doyne Farmer

J. Doyne Farmer

University of Oxford - Institute for New Economic Thinking at the Oxford Martin School; Santa Fe Institute

Ilija I. Zovko

affiliation not provided to SSRN

Date Written: June 24, 2008

Abstract

This paper analyzes correlations in patterns of trading of different members ofthe London Stock Exchange. The collection of strategies associated with a memberinstitution is defined by the sequence of signs of net volume traded by that insti-tution in hour intervals. Using several methods we show that there are significantand persistent correlations between institutions. In addition, the correlations arestructured into correlated and anti-correlated groups. Clustering techniques usingthe correlations as a distance metric reveal a meaningful clustering structure withtwo groups of institutions trading in opposite directions.

Suggested Citation

Farmer, J. Doyne and Zovko, Ilija I., Correlations and Clustering in the Trading of Membersof the London Stock Exchange (June 24, 2008). Available at SSRN: https://ssrn.com/abstract=1150808

J. Doyne Farmer

University of Oxford - Institute for New Economic Thinking at the Oxford Martin School ( email )

Eagle House
Walton Well Road
Oxford, OX2 6ED
United Kingdom

HOME PAGE: http://www.inet.ox.ac.uk/people/view/4

Santa Fe Institute ( email )

1399 Hyde Park Road
Santa Fe, NM 87501
United States
505-984-8800 (Phone)
505-982-0565 (Fax)

HOME PAGE: http://www.santafe.edu/~jdf/

Ilija I. Zovko (Contact Author)

affiliation not provided to SSRN ( email )

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