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- Title
Information, Sentiment, and Price in a Fast Order-Driven Market.
- Authors
Derviz, Alexis
- Abstract
The paper models an order-driven market 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.
- Subjects
PRICING; MARKET orders; SECURITIES trading; INDUSTRIAL management; PRICE maintenance
- Publication
IUP Journal of Financial Risk Management, 2011, Vol 8, Issue 3, p43
- ISSN
0972-916X
- Publication type
Article