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Analysis of binary trading patterns in Xetra

  • Maurer, Kai-Oliver
  • Schäfer, Carsten
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    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.

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    File URL: http://econstor.eu/bitstream/10419/43245/1/630565058.pdf
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    Paper provided by Center for Financial Studies (CFS) in its series CFS Working Paper Series with number 2010/12.

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    Date of creation: 2010
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    Handle: RePEc:zbw:cfswop:201012
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