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Comparison of Performance of Trading Transaction Algorithms: Evidence from Tehran Stock Exchange

Fathabadi, Mahdi | 2018

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  1. Type of Document: M.Sc. Thesis
  2. Language: Farsi
  3. Document No: 51747 (44)
  4. University: Sharif University of Technology
  5. Department: Management and Economics
  6. Advisor(s): Zamani, Shiva; Ebrahimnezhad, Ali
  7. Abstract:
  8. One of the issues that has always been paid attention to financial markets is that the use of mathematical relations and formulas for the better estimation of the forecasts made by the process of indicators that are of great importance in financial markets. In financial markets, algorithms have been developed to help reduce the cost of executing transactions from a variety of factors, in order to impose less costs on traders. In these algorithms, a market order and a limited order are used in such a way that the cost of executing transactions can eventually be minimized. Under a limited order, traders determine how much their stake will be at what price they are willing to trade, but in the market order, traders do not determine at what price they are willing to trade their shares. In fact, the share price is bought or sold in accordance with what is traded on the market. In this study, with the help of various algorithms that have been developed to reduce the implicit costs of traders, they tried to compare their performance against each other in Tehran Stock Exchange. The implicit expense implies that the trader pays for the execution of his transactions to execute his transactions within the specified time period. The results obtained from this study show that algorithms that use more limited orders are better than market orders. This is the result of comparing the distribution of the implicit costs of transactions on the various days each trader would have to pay for his transactions. Also, in this study, we conclude that the implicit cost of transactions is not in line with purchasing and purchasing power, and this result is in line with previous studies and conclusions. In other words, the performance of transaction execution algorithms used to reduce the implicit transaction costs is on the purchasing side better than sales
  9. Keywords:
  10. Algorithmic Trading ; Price Impact ; Tehran Stock Exchange ; Market Order ; Limit Order

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