Grasping Asymmetric Information in Market Impacts

Eur. Phys. J. B (2018) 91: 266

DOI: 10.1140/epjb/e2018-80599-5

23 Pages Posted: 23 Oct 2017 Last revised: 23 Apr 2019

See all articles by Shanshan Wang

Shanshan Wang

Faculty of Physics, University of Duisburg-Essen

Sebastian Neusüß

Deutsche Börse AG

Thomas Guhr

University of Duisburg-Essen

Date Written: October 22, 2017

Abstract

The price impact for a single trade is estimated by the immediate response on an event time scale, i.e., the immediate change of midpoint prices before and after a trade. We work out the price impacts across a correlated financial market. We quantify the asymmetries of the distributions and of the market structures of cross-impacts, and find that the impacts across the market are asymmetric and non-random. Using spectral statistics and Shannon entropy, we visualize the asymmetric information in price impacts. Also, we introduce an entropy of impacts to estimate the randomness between stocks. We show that the useful information is encoded in the impacts corresponding to small entropy. The stocks with large number of trades are more likely to impact others, while the less traded stocks have higher probability to be impacted by others.

Keywords: Market Impact, Asymmetric Information, Eigenvalue Spectra, Entropy, Network

JEL Classification: G14, D82, C55

Suggested Citation

Wang, Shanshan and Neusüß, Sebastian and Guhr, Thomas, Grasping Asymmetric Information in Market Impacts (October 22, 2017). Eur. Phys. J. B (2018) 91: 266, DOI: 10.1140/epjb/e2018-80599-5, Available at SSRN: https://ssrn.com/abstract=3056986 or http://dx.doi.org/10.2139/ssrn.3056986

Shanshan Wang (Contact Author)

Faculty of Physics, University of Duisburg-Essen ( email )

Lotharstrasse 1
Duisburg, 47048
Germany

Sebastian Neusüß

Deutsche Börse AG ( email )

Neue Börsenstr. 1
60485 Frankfurt/Main, 60485
Germany

Thomas Guhr

University of Duisburg-Essen ( email )

Lotharstrasse 1
Duisburg, 47048
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
53
Abstract Views
822
Rank
721,668
PlumX Metrics