Information transition in trading and its effect on market efficiency: an entropy approach

Chen, Jing ORCID: https://orcid.org/0000-0001-7135-2116 and Liu, Anqi ORCID: https://orcid.org/0000-0002-9224-084X 2021. Information transition in trading and its effect on market efficiency: an entropy approach. Presented at: 1st International Forum on Financial Mathematics and FinTech, Beijing, China, 29 June - 2 July 2019. Proceeding of the First International Academic Forum on Financial Mathematics and Financial Technology. Proceeding of the First International Academic Forum on Financial Mathematics and Financial Technology. Financial Mathematics and Fintech Springer, pp. 59-77. Item availability restricted.

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Abstract

The Efficient Market Hypothesis has been well explored in terms of daily responses to market movements and financial reports. However, there is lack of evidence about information efficiency after the popularization of intraday trading. We investigate the time series properties of information adopted in the intraday market, in particular the causality effects. We use 30-min market price and news data to represent the past market data and the public information respectively, so that our analysis is in line with the EMH framework. Traders’ responses to such information are associated with the financial crisis. There was strong overreaction to market data right before the 2008 crisis and traders tend to rely more on news data during the crisis. We confirm that, in terms of the intraday information efficiency, it is worthwhile to adopt both types of information. Furthermore, there is still room for improving the price discovery process to reveal such information more effectively.

Item Type:	Conference or Workshop Item (Paper)
Date Type:	Publication
Status:	Published
Schools:	Mathematics
Subjects:	H Social Sciences > HG Finance Q Science > QA Mathematics
Publisher:	Springer
Date of First Compliant Deposit:	26 May 2020
Date of Acceptance:	5 April 2020
Last Modified:	07 Nov 2022 10:10
URI:	https://orca.cardiff.ac.uk/id/eprint/131357

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