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Identification of clusters of investors from their real trading activity in a financial market

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  • Michele Tumminello
  • Fabrizio Lillo
  • Jyrki Piilo
  • Rosario N. Mantegna

Abstract

We use statistically validated networks, a recently introduced method to validate links in a bipartite system, to identify clusters of investors trading in a financial market. Specifically, we investigate a special database allowing to track the trading activity of individual investors of the stock Nokia. We find that many statistically detected clusters of investors show a very high degree of synchronization in the time when they decide to trade and in the trading action taken. We investigate the composition of these clusters and we find that several of them show an over-expression of specific categories of investors.

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File URL: http://arxiv.org/pdf/1107.3942
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Paper provided by arXiv.org in its series Papers with number 1107.3942.

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Date of creation: Jul 2011
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Handle: RePEc:arx:papers:1107.3942

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  1. Hyuk Choe & Bong-Chan Kho & Rene M. Stulz, 1998. "Do Foreign Investors Destabilize Stock Markets? The Korean Experience in 1997," NBER Working Papers 6661, National Bureau of Economic Research, Inc.
  2. Esteban Moro & Javier Vicente & Luis G. Moyano & Austin Gerig & J. Doyne Farmer & Gabriella Vaglica & Fabrizio Lillo & Rosario N. Mantegna, 2009. "Market impact and trading profile of large trading orders in stock markets," Papers 0908.0202, arXiv.org.
  3. Hommes, Cars H., 2006. "Heterogeneous Agent Models in Economics and Finance," Handbook of Computational Economics, Elsevier, in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 23, pages 1109-1186 Elsevier.
  4. repec:att:wimass:9621 is not listed on IDEAS
  5. Angelo Carollo & Gabriella Vaglica & Fabrizio Lillo & Rosario N. Mantegna, 2012. "Trading activity and price impact in parallel markets: SETS vs. off-book market at the London Stock Exchange," Quantitative Finance, Taylor & Francis Journals, Taylor & Francis Journals, vol. 12(4), pages 517-530, November.
  6. Carl Chiarella, 1992. "The Dynamics of Speculative Behaviour," Working Paper Series, Finance Discipline Group, UTS Business School, University of Technology, Sydney 13, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
  7. B. Tóth & F. Lillo & J. D. Farmer, 2010. "Segmentation algorithm for non-stationary compound Poisson processes," The European Physical Journal B - Condensed Matter and Complex Systems, Springer, Springer, vol. 78(2), pages 235-243, November.
  8. Hasbrouck, Joel, 2007. "Empirical Market Microstructure: The Institutions, Economics, and Econometrics of Securities Trading," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195301649, October.
  9. Gode, Dhananjay K & Sunder, Shyam, 1993. "Allocative Efficiency of Markets with Zero-Intelligence Traders: Market as a Partial Substitute for Individual Rationality," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(1), pages 119-37, February.
  10. John R. Nofsinger & Richard W. Sias, 1999. "Herding and Feedback Trading by Institutional and Individual Investors," Journal of Finance, American Finance Association, American Finance Association, vol. 54(6), pages 2263-2295, December.
  11. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, Econometric Society, vol. 53(6), pages 1315-35, November.
  12. Brock, William A. & Hommes, Cars H., 1998. "Heterogeneous beliefs and routes to chaos in a simple asset pricing model," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 22(8-9), pages 1235-1274, August.
  13. Lux, T. & M. Marchesi, . "Scaling and Criticality in a Stochastic Multi-Agent Model of a Financial Market," Discussion Paper Serie B 438, University of Bonn, Germany, revised Jul 1998.
  14. John M. Griffin & Jeffrey H. Harris & Selim Topaloglu, 2003. "The Dynamics of Institutional and Individual Trading," Journal of Finance, American Finance Association, American Finance Association, vol. 58(6), pages 2285-2320, December.
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