Trading Strategies in the Overnight Money Market: Correlations and Clustering on the e-MID Trading Platform
AbstractWe analyze the correlations in patterns of trading for members of the Italian interbank trading platform e-MID. The trading strategy of a particular member institution is defined as the sequence of (intra-) daily net trading volumes within a certain semester. Based on this definition, we show that there are significant and persistent bilateral correlations between institutions' trading strategies. In most semesters we find two clusters, with positive correlations within the clusters and negative correlations between them. We show that the two clusters mostly contain continuous net buyers and net sellers of money, respectively, and that cluster memberships of individual banks are highly persistent. Additionally, we highlight some problems related to our definition of trading strategies. Our findings add further evidence on the fact that preferential lending relationships on the micro-level lead to community structure on the macro-level
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1766.
Length: 29 pages
Date of creation: Mar 2012
Date of revision:
interbank market; socio-economic networks; community identification;
Other versions of this item:
- Fricke, Daniel, 2012. "Trading strategies in the overnight money market: Correlations and clustering on the e-MID trading platform," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(24), pages 6528-6542.
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-04-10 (All new papers)
- NEP-BAN-2012-04-10 (Banking)
- NEP-NET-2012-04-10 (Network Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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