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...

We propose an information theoretic approach to measure price efficiency of financial assets and aggregate markets. Our measures draw on the idea of return predictability and are directly linked to the weak-form efficiency of the Efficient Market Hypothesis. Asness et. al. (2013) document strong...

We use a unique dataset of bond downgrades from a niche rating company that has been found to be reacting faster to publicly available information than its competitors. Using regime-switching models we propose risk measures to quantify stock return disturbances (distress costs) associated with...

This paper considers the role of valuation in portfolio theory. In particular, we examine value-price ratios and their dynamic properties. Five valuation principles are proposed, namely the separability of prices and valuations, the asymptotic convergence of value-price ratios, the finite...

Statistical properties of an order book and the effect they have on price dynamics were studied using the high-frequency NASDAQ Level II data. It was observed that the size distribution of marketable orders (transaction sizes) has power law tails with an exponent 1+mu_market=2.4 plus-minus 0.1....

A number of inefficiencies in the art market stress the fact that art remains a highly risky investment. The art market is characterized by high illiquidity, inefficient market information, high transaction costs, long transaction time and the absence of a hedging mechanism. Therefore, unlike...

The Chicago Board Options Exchange (CBOE) Volatility Index, VIX, is calculated based on prices of out-of-the-money put and call options on the Samp;P 500 index (SPX). Sometimes called the investor fear gauge, the VIX is a measure of the implied volatility of the SPX, and is observed to be...

The accurate forecast of the foreign currencies exchange rates at the ultra high frequency electronic trading in the foreign currencies exchange markets is a main topic of our research: 1) the present state of the foreign currencies exchange markets in Asia, Europe and North America; 2) the...

This study provides new insights on the nexus between Tweet sentiments and stock price in China. Based on machine learning, we classify the Tweets from Weibo, a Twitter's variant in China into five sentiments of anger, disgust, joyful, sadness, and fear. Using wavelet analysis, we find close...