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Finding informed traders in futures and their inderlying assets in intraday trading

  • Lyudmila A. Glik
  • Oleg L. Kritski
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    We propose a mathematical procedure for finding informed traders in ultra-high frequency trading. We wrote it as Vector ARMA and found condition of its stationarity. For the price exposure complied with ARMA(1,2) we proved that underlying asset price difference can be derived as ARMA(1,1) process. For validation of the model, we test an influence of informed traders in EUR/USD, GBP/USD, USD/RUB pairs and futures, in gold and futures prices, in Russian Trade System share index (RTS) and futures trading. We found some evidence of such influence in gold and currency pair USD/RUB pricing, in RTS index in the period from Dec 16 till Dec 20, 2013 and from Jan 28 till Jan 30.

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    File URL: http://arxiv.org/pdf/1402.6583
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    Paper provided by arXiv.org in its series Papers with number 1402.6583.

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    Date of creation: Feb 2014
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    Handle: RePEc:arx:papers:1402.6583
    Contact details of provider: Web page: http://arxiv.org/

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    1. Deb, Pragyan & Koo, Bonsoo & Liu, Zijun, 2014. "Competition, premature trading and excess volatility," Journal of Banking & Finance, Elsevier, vol. 41(C), pages 178-193.
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    12. Piccione, Michele & Spiegler, Ran, 2014. "Manipulating market sentiment," Economics Letters, Elsevier, vol. 122(2), pages 370-373.
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    16. Alexander, C. & Barbosa, A., 2008. "Hedging index exchange traded funds," Journal of Banking & Finance, Elsevier, vol. 32(2), pages 326-337, February.
    17. Yi-Tsung Lee & Wei-Shao Wu & Yun Yang, 2013. "Informed Futures Trading and Price Discovery: Evidence from Taiwan Futures and Stock Markets," Asia-Pacific Financial Markets, Springer, vol. 20(3), pages 219-242, September.
    18. Vitale, Paolo, 2012. "Risk-averse insider trading in multi-asset sequential auction markets," Economics Letters, Elsevier, vol. 117(3), pages 673-675.
    19. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November.
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