Download or read book Trading Frequency and Information Efficiency written by Feng Gao and published by . This book was released on 2014 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the relation between price informativeness and trading frequency. We develop a sequential trading model to capture the tradeoff between trading more frequently and acquiring more information. The key component of the model is the cost of information collection and processing. When information flow comes sequentially, traders must give up some early trading opportunities if they want to acquire more information. We show that more trading opportunities may induce informed traders to participate in more trades before obtaining more accurate information. Consequently, when informed traders trade more frequently, less information is impounded into prices. Empirical tests using stocks listed on NYSE, as well as the Shanghai Stock Exchange and the Shenzhen Stock Exchange, support the two testable implications of our model -- a negative relation between the quality of the information environment and informed traders' trading frequency, and a negative relation between informed traders' trading frequency and price informativeness. One implication of our model and empirical results is that a decrease in excessive trading activities may help shift market participants' attention from short-term price movements to companies' fundamental information so that the information could be more efficiently impounded into prices, which, in turn, may further lead toward better resource allocation in financial markets.

Download or read book Market Microstructure written by Frédéric Abergel and published by John Wiley & Sons. This book was released on 2012-04-03 with total page 194 pages. Available in PDF, EPUB and Kindle. Book excerpt: The latest cutting-edge research on market microstructure Based on the December 2010 conference on market microstructure, organized with the help of the Institut Louis Bachelier, this guide brings together the leading thinkers to discuss this important field of modern finance. It provides readers with vital insight on the origin of the well-known anomalous "stylized facts" in financial prices series, namely heavy tails, volatility, and clustering, and illustrates their impact on the organization of markets, execution costs, price impact, organization liquidity in electronic markets, and other issues raised by high-frequency trading. World-class contributors cover topics including analysis of high-frequency data, statistics of high-frequency data, market impact, and optimal trading. This is a must-have guide for practitioners and academics in quantitative finance.

Download or read book Trading Frequency and the Efficiency of Price Discovery in a Non Dealer Market written by Shmuel Hauser and published by . This book was released on 2013 with total page 11 pages. Available in PDF, EPUB and Kindle. Book excerpt: The increasing popularity of non-dealer security markets that offer automated, computer-based, continuous trading reflects a presumption that institutionally-set trading sessions are economically obsolete. This theoretical paper investigates the effect of trading frequency, a key feature of the trading mechanism, on the efficiency of price discovery in a non-dealer market. The effect of diverging expectations on error-based and overall return volatility is isolated by tracing the market pricing error to the correlation structures of arriving information and pricing errors of individual traders. The analysis reveals that, due to a portfolio effect, an increase in the trading time interval has contradictory effects on the portion of return volatility arising from pricing errors. A greater accumulation of information increases error-based return volatility, but a greater volume and number of traders per session have the opposite effect. The net effect on overall return volatility can go either way. The results show that return volatility of heavily-traded securities is likely to be minimized under continuous trading, but volatility of thinly traded securities may be minimized under discrete trading at moderate time intervals. The probability that the latter will occur increases with the divergence of expectations among traders. These findings challenge the presumption that automated continuous trading in a non-dealer market is more efficient than discrete trading for all securities regardless of trading volume. Findings are applicable to all economies, but have a special relevance for developing countries where often a single market is dominated by small issues and a low volume of trade. As part of the analysis, we show how to correct the biased estimate of inter-session price volatility when observations are less frequent than the trading sessions themselves.

Download or read book Information Efficiency and the Effect of High Frequency Trading in the U S Futures Markets written by Seung Youn Cha and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book High frequency data analysis written by Nadine Hirte and published by GRIN Verlag. This book was released on 2004-06-23 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2003 in the subject Mathematics - Statistics, grade: 2.0 (B), European University Viadrina Frankfurt (Oder), language: English, abstract: Today the financial market becomes more complex and includes more competition. Reasons are trends like globalization, liberalization and lower-cost trading mechanism. The market microstructure research has the aim of an efficient market. It is focused on the structure of the financial market. The investigation becomes possible through the availability of high- frequency data. Those data exist especially in the United States and like that most of the research focuses this market. To explain the phenomena, which have been found adequate, models that fit the characteristics of high- frequency data have to be developed. The research is important to understand actions on the market as well as develop new efficient mechanism. One part of the market microstructure field is the bid-ask spread. It will be focus of this paper. In the first two parts it will be discussed theoretically. In the last part one model will be empirically analyzed and tested on its usefulness and validity. The second part of this paper explains the basic elements surrounding the research of bid-ask spread. Those are the financial market, market microstructure as well as high-frequency data. In the following part the bid-ask spread itself, approaches, researches and models focussing the spread will be discussed. The model of Roll (1984) will be explained in detail. The last part will be the empirical analysis of the model of Roll. It is analyzed with data from the NASDAQ.

Download or read book Stock Market Efficiency and Price Behaviour written by O. P. Gupta and published by . This book was released on 1989 with total page 408 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Efficiency and Anomalies in Stock Markets written by Wing-Keung Wong and published by Mdpi AG. This book was released on 2022-02-17 with total page 232 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Efficient Market Hypothesis believes that it is impossible for an investor to outperform the market because all available information is already built into stock prices. However, some anomalies could persist in stock markets while some other anomalies could appear, disappear and re-appear again without any warning. A Special Issue on "Efficiency and Anomalies in Stock Markets" will be devoted to advancements in the theoretical development of market efficiency and anomaly in the Stock Market, as well as applications in Stock Market efficiency and anomalies.

Download or read book What Is the Optimal Trading Frequency in Financial Markets written by Songzi Du and published by . This book was released on 2016 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the impact of increasing trading frequency in financial markets on allocative efficiency. We build and solve a dynamic model of sequential double auctions in which traders trade strategically with demand schedules. Trading needs are generated by time-varying private information about the asset value and private values for owning the asset, as well as quadratic inventory costs. We characterize a linear equilibrium with stationary strategies and its efficiency properties in closed form. Frequent trading (more double auctions per unit of time) allows more immediate asset reallocation after new information arrives, at the cost of a lower volume of beneficial trades in each double auction. Under stated conditions, the trading frequency that maximizes allocative efficiency coincides with the information arrival frequency for scheduled information releases, but can far exceed the information arrival frequency if new information arrives stochastically. A simple calibration of the model suggests that a moderate market slowdown to the level of seconds or minutes per double auction can improve allocative efficiency for assets with relatively narrow investor participation and relatively infrequent news, such as small- and micro-cap stocks.

Download or read book High Frequency Trading written by Irene Aldridge and published by John Wiley & Sons. This book was released on 2013-04-22 with total page 326 pages. Available in PDF, EPUB and Kindle. Book excerpt: A fully revised second edition of the best guide to high-frequency trading High-frequency trading is a difficult, but profitable, endeavor that can generate stable profits in various market conditions. But solid footing in both the theory and practice of this discipline are essential to success. Whether you're an institutional investor seeking a better understanding of high-frequency operations or an individual investor looking for a new way to trade, this book has what you need to make the most of your time in today's dynamic markets. Building on the success of the original edition, the Second Edition of High-Frequency Trading incorporates the latest research and questions that have come to light since the publication of the first edition. It skillfully covers everything from new portfolio management techniques for high-frequency trading and the latest technological developments enabling HFT to updated risk management strategies and how to safeguard information and order flow in both dark and light markets. Includes numerous quantitative trading strategies and tools for building a high-frequency trading system Address the most essential aspects of high-frequency trading, from formulation of ideas to performance evaluation The book also includes a companion Website where selected sample trading strategies can be downloaded and tested Written by respected industry expert Irene Aldridge While interest in high-frequency trading continues to grow, little has been published to help investors understand and implement this approach—until now. This book has everything you need to gain a firm grip on how high-frequency trading works and what it takes to apply it to your everyday trading endeavors.

Download or read book High Frequency Trading and Market Efficiency written by Matthew Brigida and published by . This book was released on 2016 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: This analysis uses the weekly natural gas storage report to investigate the quickness, and test the accuracy, of liquidity taking high-frequency traders (HFT) in modern markets. We find those who trade within the first 50 milliseconds accurately incorporate the information contained in the storage report into prices, and earn the majority of profits. In fact, HFT profits are decreasing in the time it takes them to trade after the announcement (measured to 200 milliseconds). Further tests find no evidence of informed trading prior to the release of the report, and so the HFT reaction to the report incorporates the information contained therein into prices.

Download or read book Preserving Capital Markets Efficiency in the High Frequency Trading Era written by Gaia Balp and published by . This book was released on 2018 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: Although HFT has become a main feature of financial markets internationally, its impact on equity markets' functioning is still under discussion, since HFT can negatively affect market quality and stability. Regulatory measures recently adopted on both sides of the Atlantic to better control HFT-related risks chiefly focus on markets' stability, orderly functioning, and integrity, but poorly consider how HFT interacts with the allocative function of price discovery. In order to fill this gap, this article focuses on how HFT-related informational inequalities among investors threaten equity markets' (long-term) efficiency. Subscription to news wires and market data-feeds, along with co-location, grant HFTs early access to market-moving information that allows for latency arbitrage and trading ahead of other investors, which can discourage informed (slower) traders from undertaking costly fundamental analysis. Therefore, HFT challenges the theoretical framework underlying the Efficient Capital Markets Hypothesis, and can negatively affect price accuracy, real resource allocation and equity markets' allocative efficiency. Against this backdrop, this article develops a conceptual framework for possible regulatory strategies aimed at limiting the negative effects of HFT on allocative market efficiency by reducing HFTs' speed advantage or incentivizing fundamental informed traders to enter markets where they face costly pressures to compete with HFTs. Restricting the sale of trade data feeds or mandating speed bumps may discourage HFT and weaken its positive effects in terms of increased liquidity and better short-term price discovery, without definitely curbing HFT-related risks concerning price long-term accuracy, while replacing the current continuous trading regime with a batched auctions-based regime would ask for major regulatory changes. Introducing an EU-like continuous, event-driven, and timelier, disclosure regime could limit these possible drawbacks by providing informed traders with more frequent and cheaper access to relevant information.

Download or read book Liquidity Markets and Trading in Action written by Deniz Ozenbas and published by Springer Nature. This book was released on 2022 with total page 111 pages. Available in PDF, EPUB and Kindle. Book excerpt: This open access book addresses four standard business school subjects: microeconomics, macroeconomics, finance and information systems as they relate to trading, liquidity, and market structure. It provides a detailed examination of the impact of trading costs and other impediments of trading that the authors call rictions It also presents an interactive simulation model of equity market trading, TraderEx, that enables students to implement trading decisions in different market scenarios and structures. Addressing these topics shines a bright light on how a real-world financial market operates, and the simulation provides students with an experiential learning opportunity that is informative and fun. Each of the chapters is designed so that it can be used as a stand-alone module in an existing economics, finance, or information science course. Instructor resources such as discussion questions, Powerpoint slides and TraderEx exercises are available online.

Download or read book High Frequency Trading Economic Necessity or Threat to the Economy written by Stefan Höppel and published by diplom.de. This book was released on 2014-02-01 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the last four decades, technological progress led to an electrification of stock trading systems. It was realized that the profitability of trading strategies could be increased by employing computer algorithms to trade autonomously. This led to the implementation of High Frequency Trading (HFT). Theoretically HFT should increase efficiency in financial markets but it seems that, at least under certain circumstances, it causes market instability. The aim of this paper is to discuss the effect of HFT on market quality and why HFT cannot be fully explained by the neoclassical theory of economics. Therefore, the controversial positions in literature will be presented and discussed. It is especially referred to the influence of HFT on liquidity, price discovery and volatility. Primarily, its negative effect on volatility seems to contravene the modern finance. Furthermore, in the course of this work it will be illustrated that, by employing strict regulation of financial markets, this negative impact cannot be reduced to a sufficient extent in order for HFT to be characterized as market optimizing, according to the neoclassical theory of economics.

Download or read book Handbook of High Frequency Trading written by Greg N. Gregoriou and published by Academic Press. This book was released on 2015-02-05 with total page 495 pages. Available in PDF, EPUB and Kindle. Book excerpt: This comprehensive examination of high frequency trading looks beyond mathematical models, which are the subject of most HFT books, to the mechanics of the marketplace. In 25 chapters, researchers probe the intricate nature of high frequency market dynamics, market structure, back-office processes, and regulation. They look deeply into computing infrastructure, describing data sources, formats, and required processing rates as well as software architecture and current technologies. They also create contexts, explaining the historical rise of automated trading systems, corresponding technological advances in hardware and software, and the evolution of the trading landscape. Developed for students and professionals who want more than discussions on the econometrics of the modelling process, The Handbook of High Frequency Trading explains the entirety of this controversial trading strategy. Answers all questions about high frequency trading without being limited to mathematical modelling Illuminates market dynamics, processes, and regulations Explains how high frequency trading evolved and predicts its future developments

Download or read book The Science Of Financial Market Trading written by Don K Mak and published by World Scientific. This book was released on 2003-03-19 with total page 261 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this book, Dr Mak views the financial market from a scientific perspective. The book attempts to provide a realistic description of what the market is, and how future research should be developed. The market is a complex phenomenon, and can be forecasted only with errors — if that particular market can be forecasted at all.The book reviews the scientific literatures on the financial market and describes mathematical procedures which demonstrate that some markets are non-random. How the markets are modeled — phenomenologically and from first principle — is explained.It discusses indicators, which are quite objective, rather than price patterns, which are rather subjective. Similarities between indicators in market trading and operators in mathematics are noted, and particularly, between oscillator indicators and derivatives in Calculus. It illustrates why some indicators, e.g., Stochastics, have limited usage. Several new indicators are designed and tested on theoretical waveforms to check their validity and applicability. The indicators have a minimal time lag, which is significant for trading purposes. Common market behaviors like divergences between price and momentum are explained. A skipped convolution technique is introduced to allow traders to pick up market movements at an earlier time. The market is treated as a nonlinear phenomenon. Forecasting of when the market is going to turn is emphasized.

Download or read book Equity Trading Round Up written by Robert A. Schwartz and published by Springer Nature. This book was released on 2020-11-16 with total page 173 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book examines the complexity of trading and the creation of liquidity. Titled after the Baruch College Financial Markets Conference, Equity Market Round-Up: Proposals for Strengthening the Markets, this book explores how regulation has a clear impact on market structure and, therefore, how market structure impacts efficient trading and capital formation. The following questions are analyzed: What are the liquidity strategies for pricing and interacting? Is liquidity any more available today for an illiquid stock than it was on the floor of the exchange 20 years ago? How do we cope with the dynamics of a continuous market? How can market structure be improved? What are the effects of high frequency trading? The Zicklin School of Business Financial Markets Series presents the insights emerging from a sequence of conferences hosted by the Zicklin School at Baruch College for industry professionals, regulators, and scholars. The transcripts from the conferences are edited for clarity, perspective and context; material and comments from subsequent interviews with the panelists and speakers are included for a complete thematic presentation. Each book is focused on a well delineated topic, but all deliver broad insights into the quality and efficiency of the U.S. equity markets and the dynamic forces that are changing them.

Download or read book The High Frequency Game Changer written by Paul Zubulake and published by John Wiley & Sons. This book was released on 2011-02-16 with total page 177 pages. Available in PDF, EPUB and Kindle. Book excerpt: The financial industry's leading independent research firm's forward-looking assessment into high frequency trading Once regarded as a United States-focused trend, today, high frequency trading is gaining momentum around the world. Yet, while high frequency trading continues to be one of the hottest trends in the markets, due to the highly proprietary nature of the computer transactions, financial firms and institutions have made very little available in terms of information or "how-to" techniques. That's all changed with The High Frequency Game Changer: How Automated Trading Strategies Have Revolutionized the Markets. In the book, Zubulake and Lee present an overview of how high frequency trading is changing the face of the market. The book Explains how we got here and what it means to traders and investors Details how to build a high frequency trading firm, including the relevant tools, strategies, and trading talent Defines key components common to HFT such as algorithms, low latency trading infrastructure, collocation etc. The High Frequency Game Changer takes a highly controversial and extremely complicated subject and makes it accessible to anyone with an interest or stake in financial markets.