Parameters for Estimation of Entropy to Study Price Manipulation in Stock Market

Abstract

The information theoretic concept of entropy is a useful tool in studying price manipulation in stock market. Sample entropy values computed for the price data of a scrip, for various trading days in the period during which the scrip is reported to be subject to price manipulation, prove to be potential evidence for manipulation of the scrip's price. An attempt is made in this paper to select appropriate values for the parameters used for computation of sample entropy of a short time series of stock prices.

Keywords: Stock price manipulation, sample entropy, template size, tolerance limit, mutual information, relative error

JEL Classification: C02, C65, G19