PT  - JOURNAL ARTICLE
AU  - Jeff Bacidore
AU  - Kathryn Berkow
AU  - Ben Polidore
AU  - Nigam Saraiya
TI  - Cluster Analysis for Evaluating Trading Strategies
AID  - 10.3905/jot.2018.13.4.132
DP  - 2018 Oct 31
TA  - The Journal of Trading
PG  - 132--137
VI  - 13
IP  - 4
4099  - https://pm-research.com/content/13/4/132.short
4100  - https://pm-research.com/content/13/4/132.full
AB  - In this article, we introduce a new methodology to empirically identify the primary strategies used by a trader using only post-trade fill data. To do this, we apply a well-established statistical clustering technique called k-means to a sample of progress charts, representing the portion of the order completed by each point in the day as a measure of a trade’s aggressiveness. Our methodology identifies the primary strategies used by a trader and determines which strategy the trader used for each order in the sample. Having identified the strategy used for each order, trading cost analysis can be performed by strategy. We also discuss ways to exploit this technique to characterize trader behavior, assess trader performance, and suggest the appropriate benchmarks for each distinct trading strategy.TOPICS: Statistical methods, portfolio management/multi-asset allocation, performance measurement