Institute of Information Theory and Automation

Publication details

Information, Sentiment, and Price in a Fast Order-Driven Market

Journal Article

Derviz Alexis


serial: IUP Journal of Financial Risk Management vol.8, 3 (2011), p. 43-75

research: CEZ:AV0Z10750506

keywords: limit order, market order, high frequency trading, price dicovery, sentiment

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abstract (eng):

An order-driven market is modeled in which many traders with heterogeneous private values and information submit limit and market orders simultaneously. Order execution is partially random. There may be a bias in the traders’ prior beliefs (“market sentiment”). In this environment, although market buys and sells depend monotonically on the degree of bullish sentiment, market order flows are in a non-monotonous relationship with the proportion of high private value traders (bulls). Additionally, sentiment has a stronger effect on volume and net direction of trades leading to a given central price, than the actual distribution of private values.

RIV: AH

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Last modification: 21.12.2012
Institute of Information Theory and Automation