Clustering Structure of Microstructure Measures
20 Pages Posted: 28 Jul 2021 Last revised: 6 Nov 2021
Date Written: March 15, 2019
This paper builds the clustering model of measures of market microstructure features which are popular in predicting the stock returns. In a 10-second time frequency, we study the clustering structure of different measures to find out the best ones for predicting. In this way, we can predict more accurately with a limited number of predictors, which removes the noise and makes the model more interpretable.
Keywords: market microstructure, interpretable machine learning, artificial intelligence in finance, prototype clustering, high-dimensional statistics, dimension reduction
JEL Classification: C10, G10
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