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High frequency trad...
High frequency trading and comovement in financial markets
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- Putnins, Talis (author)
- Stockholm School of Economics,Handelshögskolan i Stockholm
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- Malceniece, Laura (author)
- Stockholm School of Economics,Handelshögskolan i Stockholm
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- Malcenieks, Kārlis (author)
- Stockholm School of Economics,Handelshögskolan i Stockholm
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(creator_code:org_t)
- Elsevier, 2019
- 2019
- English.
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In: Journal of Financial Economics. - : Elsevier. - 0304-405X. ; 134:2, s. 381-399
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Abstract
Subject headings
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- Using the staggered entry of Chi-X in 12 European equity markets as a source of exogenous variation in high frequency trading (HFT), we find that HFT causes significant increases in comovement in returns and in liquidity. About one-third of the increase in return comovement is due to faster diffusion of market-wide information. We attribute the remaining two-thirds to correlated trading strategies of HFTs. The increase in liquidity comovement is consistent with HFT liquidity providers being better able to monitor other stocks and adjust their liquidity provision accordingly. Our findings suggest a channel by which HFT impacts the cost of capital.
Subject headings
- SAMHÄLLSVETENSKAP -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)
- SOCIAL SCIENCES -- Economics and Business -- Economics (hsv//eng)
Publication and Content Type
- art (subject category)
- ref (subject category)
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