Correlations and Clustering in the Trading of Membersof the London Stock Exchange
Posted: 24 Jun 2008
Date Written: June 24, 2008
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.
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