Identifying of the Expectations of Stock Trading Participants for the Diagnosis of Financial Market Environment Using the Online Analysis of an Order Book
Identifying of the Expectations of Stock Trading Participants for the Diagnosis of Financial Market Environment Using the Online Analysis of an Order Book

Author(s): Sergey Petrov, Nadezhda Yashina, Oksana Kashina, Natalia N. PRONCHATOVA-RUBTSOVA, Mikhail Rogozin
Subject(s): Business Economy / Management, Micro-Economics, Financial Markets, ICT Information and Communications Technologies
Published by: Masarykova univerzita nakladatelství
Keywords: financial market forecasting; investors’ expectations; flows of exchange orders; bid-ask spread; the depth of the stock market;
Summary/Abstract: Modern trading platforms made it possible to monitor the exchange auction of counter orders in real time that opened up an access to valuable information on many intramarket processes and the emergence of new market price trends. The paper aims to develop an original approach permitting to discover stock market players’ expectations with regard to the future share price dynamics. The theoretical framework is based on the microeconomic model of individual trader’s net demand proposed in the authors’ previous studies. The model explains conditions under which traders place either limit or market orders to buy and to sell stock. It associates price and volume of any limit order with the capital capacity of the trader’s net demand which is viewed as an indicator of the trader’s holding of the given stock. In this way it becomes possible to construct an algorithm for monitoring of holdings of stocks owned by traders responsible for the separate quotes in the order book. As an application of the algorithm an example is considered signaling about market participants’ expectations of a share price rising at a given point in time. The experimental procedure proposed in the paper involves the ongoing analysis of instantaneous data of the trading platform that are displaying by an order book for stock. Some variants of computerizing of the algorithm are discussed aiming to implement it for the monitoring of financial market environment. The methods developed are of interest either for por

• Details
• Contents