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Interactions among High-Frequency Traders

Journal article
Authors E. Benos
J. Brugler
Erik Hjalmarsson
F. Zikes
Published in Journal of Financial and Quantitative Analysis
Volume 52
Issue 4
Pages 1375-1402
ISSN 0022-1090
Publication year 2017
Published at Centre for Finance
Department of Economics
Pages 1375-1402
Language English Konishok j , 1992 , journal of financial economics , v32 , p23
Links doi.org/10.1017/s0022109017000485
Keywords price discovery, liquidity, market, speculation, arbitrage, risk, Business & Economics, long jb, 1990, journal of finance, v45, p379
Subject categories Economics and Business

Abstract

Using unique transactions data for individual high-frequency trading (HFT) firms in the U.K. equity market, we examine the extent to which the trading activity of individual HFT firms is correlated with each other and the impact on price efficiency. We find that HFT order flow, net positions, and total volume exhibit significantly higher commonality than those of a comparison group of investment banks. However, intraday HFT order flow commonality is associated with a permanent price impact, suggesting that commonality in HFT activity is information based and so does not generally contribute to undue price pressure and price dislocations.

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