Analysis of binary trading patterns in Xetra

Kai-Oliver Maurer and Carsten Schäfer

No 2010/12, CFS Working Paper Series from Center for Financial Studies (CFS)

Abstract: This paper proposes the Shannon entropy as an appropriate one-dimensional measure of behavioural trading patterns in financial markets. The concept is applied to the illustrative example of algorithmic vs. non-algorithmic trading and empirical data from Deutsche Börse's electronic cash equity trading system, Xetra. The results reveal pronounced differences between algorithmic and non-algorithmic traders. In particular, trading patterns of algorithmic traders exhibit a medium degree of regularity while non-algorithmic trading tends towards either very regular or very irregular trading patterns.

Keywords: Financial Markets; Electronic Markets; Algorithmic Trading; Order Entry; Equity Trading; Information Theory; Entropy Measure (search for similar items in EconPapers)
JEL-codes: C40 D0 G14 G15 G20 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfswop:201012

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