The Effect of Algorithmic Trading Systems on Stock Market Volatility

For many people, trading in stock market is a popular investment option. Stock price trends has always been an important area of interest for machine learning researchers. Modelling the stock market has always stood as a challenge, despite of many Algorithmic Trading system being available. Algorithmic trading is a mechanism involving use of Artificial Intelligence(AI) for quick trading in stock exchanges.This work focuses on understanding the role of algorithmic trading on the capital markets and examines the existence of volatility and test the homogeneousness in the degree of volatility of the chosen Emerging and the developed markets from ASIA.ADF, PP tests and Jarque-Bera tests were conducted to examine the stationarity and normality of the time series data. Returns, SD, ARIMA, ARCH, GARCH, BEKK-GARCH, Granger causality test were applied for the study. The empirical analysis depicted that volatility is present in all stock markets, with its level varying between different markets over time. This will be beneficial to the investors to arrive at right decision.