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The Impact Of High Frequency Trading On Volatility Evidence From The Italian Market
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Book Synopsis The Impact of High-Frequency Trading on Volatility. Evidence from the Italian Market by : Valeria Caivano
Download or read book The Impact of High-Frequency Trading on Volatility. Evidence from the Italian Market written by Valeria Caivano and published by . This book was released on 2015 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: The huge increase of HFT activity in recent years has posed the crucial question of whether it is beneficial for financial markets to both researchers and regulators. Recent academic research has studied the impact of HFT on different measures of market quality, such as liquidity, transaction costs, market integrity and efficiency, though the results are sometimes non conclusive. This study focuses on the impact of HFT on stock price volatility over the period 2011-2013 for a sample of 35 blue chips traded on Borsa Italiana. High frequency traders (HFTrs) are identified according to two methods. The first one, based on public information on the trading strategies of market participants, led us to identify 14 traders (so called 'pure' HFT firms). The second one includes the main investment banks active in the European markets, since they carry out some proprietary trading which could take the form of HFT (as stemming from the evidence reported in ESMA, 2014). These approaches allow the identification of a lower and upper bound for the actual share of HFT on total trading volume. Potential endogeneity of HFT is controlled through an instrumental variable approach, using as an instrument the introduction of a new trading platform that eased the HFT activity by decreasing the latency. Results show that an exogenous increase of HFT activity causes a statistically and economically significant increase in volatility. In details, an increase by one standard deviation of HFT activity carried out by 'pure' HFT firms raises volatility by an amount between 0.5 and 0.8 standard deviations. This means that, if HFT activity increases by 10 percentage points the annualized intraday volatility increases by an amount between 4 and 6 percentage points depending on the specification used. If we also take into account the activity carried out by investment banks the impact of an increase by 10 percentage points of HFT activity leads to an increase of annualized volatility by an amount between 3 and 5 percentage points. This paper adds to the existing literature by providing new empirical evidence from the Italian market. Furthermore, it contributes to the policy debate, which had recently led the European regulators to introduce new rules aimed at mitigating possible negative effects of HFT.
Book Synopsis High Frequency Trading: Economic Necessity or Threat to the Economy? by : Stefan Höppel
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.
Book Synopsis Algorithmic and High-Frequency Trading by : Álvaro Cartea
Download or read book Algorithmic and High-Frequency Trading written by Álvaro Cartea and published by Cambridge University Press. This book was released on 2015-08-06 with total page 360 pages. Available in PDF, EPUB and Kindle. Book excerpt: The design of trading algorithms requires sophisticated mathematical models backed up by reliable data. In this textbook, the authors develop models for algorithmic trading in contexts such as executing large orders, market making, targeting VWAP and other schedules, trading pairs or collection of assets, and executing in dark pools. These models are grounded on how the exchanges work, whether the algorithm is trading with better informed traders (adverse selection), and the type of information available to market participants at both ultra-high and low frequency. Algorithmic and High-Frequency Trading is the first book that combines sophisticated mathematical modelling, empirical facts and financial economics, taking the reader from basic ideas to cutting-edge research and practice. If you need to understand how modern electronic markets operate, what information provides a trading edge, and how other market participants may affect the profitability of the algorithms, then this is the book for you.
Download or read book Disrupting Finance written by Theo Lynn and published by Springer. This book was released on 2018-12-06 with total page 194 pages. Available in PDF, EPUB and Kindle. Book excerpt: This open access Pivot demonstrates how a variety of technologies act as innovation catalysts within the banking and financial services sector. Traditional banks and financial services are under increasing competition from global IT companies such as Google, Apple, Amazon and PayPal whilst facing pressure from investors to reduce costs, increase agility and improve customer retention. Technologies such as blockchain, cloud computing, mobile technologies, big data analytics and social media therefore have perhaps more potential in this industry and area of business than any other. This book defines a fintech ecosystem for the 21st century, providing a state-of-the art review of current literature, suggesting avenues for new research and offering perspectives from business, technology and industry.
Book Synopsis Global Algorithmic Capital Markets by : Walter Mattli
Download or read book Global Algorithmic Capital Markets written by Walter Mattli and published by Oxford University Press, USA. This book was released on 2019-01-03 with total page 385 pages. Available in PDF, EPUB and Kindle. Book excerpt: Global capital markets have undergone fundamental transformations in recent years and, as a result, have become extraordinarily complex and opaque. Trading space is no longer measured in minutes or seconds but in time units beyond human perception: milliseconds, microseconds, and even nanoseconds. Technological advances have thus scaled up imperceptible and previously irrelevant time differences into operationally manageable and enormously profitable business opportunities for those with the proper high-tech trading tools. These tools include the fastest private communication and trading lines, the most powerful computers and sophisticated algorithms capable of speedily analysing incoming news and trading data and determining optimal trading strategies in microseconds, as well as the possession of gigantic collections of historic and real-time market data. Fragmented capital markets are also becoming a rapidly growing reality in Europe and Asia, and are an established feature of U.S. trading. This raises urgent market governance issues that have largely been overlooked. Global Algorithmic Capital Markets seeks to understand how recent market transformations are affecting core public policy objectives such as investor protection and reduction of systemic risk, as well as fairness, efficiency, and transparency. The operation and health of capital markets affect all of us and have profound implications for equality and justice in society. This unique set of chapters by leading scholars, industry insiders, and regulators discusses ways to strengthen market governance for the benefit of society at whole.
Book Synopsis The Impact of High-Frequency Trading on Market Quality by : Shalini Agnihotri
Download or read book The Impact of High-Frequency Trading on Market Quality written by Shalini Agnihotri and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Algorithmic Trading (AT) or High-Frequency Trading (HFT) has lately turned out to be a buzzword in the current trading ecosystem. In developed economies, the bulk of such technology-driven transactions has significantly increased over the years. The Indian market has also been gradually embracing the Algo or High Frequency Trading since 2009 as more and more transactions are being routed through this platform. A technology in financial markets is considered to be good if it helps in increasing the market quality. The present study attempts to investigate the impact of HFT on the market quality. The impact of HFT on market quality is tested via three important pillars of market dynamics, i.e., market liquidity, volatility, and hedging efficiency, using a sample of daily and intra-day prices of National Stock Exchange (NSE) securities during the year 2017. The results highlight that HFT has a significant impact on liquidity enhancement, whereas no conclusive evidence regarding its impact on the volatility has been witnessed. Further, the impact of HFT on hedging efficiency has been observed, though it has not been a strong one to validate it in general.
Book Synopsis Artificial Intelligence and Market Abuse Legislation by : Filippo Annunziata
Download or read book Artificial Intelligence and Market Abuse Legislation written by Filippo Annunziata and published by Edward Elgar Publishing. This book was released on 2023-11-03 with total page 221 pages. Available in PDF, EPUB and Kindle. Book excerpt: Artificial Intelligence and Market Abuse Legislation presents a wide-reaching interdisciplinary examination of the impact of AI on the EU Market Abuse Regulation (MAR).
Book Synopsis The Impacts of High-frequency Trading on the Financial Markets' Stability by : Haval Rawf Hamza
Download or read book The Impacts of High-frequency Trading on the Financial Markets' Stability written by Haval Rawf Hamza and published by . This book was released on 2015 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: High-frequency trading (HFT) is a new area in financial markets. The term HFT refers to a subset of algorithmic trading (AT). After Michael Lewis' book "Flash Boys" HFT has quickly become a term known to the general public. As the debate over HFT continues, many concerns about contributions of HFT to market quality are raised by market participants, media, regulators, academics, and general public. Although many studies have been conducted to understand high-frequency traders' (HFTs) behaviors and their market impacts, each study targeted a different market, therefore the conclusions cannot be generalized to markets which are organized differently. Nonetheless, by studying papers that examine different markets' samples, we can advance our understanding of HFTs' behaviors in a wider area, and we can generalize our conclusion on a higher level. This paper focuses on micro-structural effects of HFT on the financial markets. Throughout this paper, changes in liquidity, price discovery, transaction cost, volatility, and market fragmentation were discussed. A review of the literature showed that: first, HFTs play a constructive role in financial markets. They reduce the bid-ask spread, cut execution cost and facilitate price efficiency. HFTs' ability to avoid adverse selection and inventory management makes them successful in providing liquidity. Second, HFT and markets' volatility are positively correlated. However, it is not clear that this correlation is due to HFTs' algorithmic strategies nor speed of trading. Many researchers claim that speed of trading does not have any negative effects on the financial market. Hence, regulators are urged to focus more on the algorithmic strategies employed by HFTs in their regulations instead of speed of execution.
Book Synopsis High Frequency Trading. Its effects on stock markets and how to control them by : Sebastian Moritz
Download or read book High Frequency Trading. Its effects on stock markets and how to control them written by Sebastian Moritz and published by GRIN Verlag. This book was released on 2018-04-23 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2018 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1.0, University of Applied Sciences Wernigerode, language: English, abstract: This paper is discussing positive and negative aspects of so-called high-frequency trading activities on global stock markets. Further, a recommendation on how to improve the current status quo will be provided.
Book Synopsis High Frequency Trading Market Impact by : Aurélien Struby
Download or read book High Frequency Trading Market Impact written by Aurélien Struby and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis investigates the impact of high frequency trading (HFT) on the stock market. In the first part I create a contextual picture by outlining HFT's history and evolution over time and reviewing changes it brought to markets structure. In particular, I focus on new risks HFT is linked to by taking the example of May 6, 2010 flash crash. Finally, I examine the regulatory environment and its adaptation to those new practices. In the second part I conduct an empirical analysis to assess the impact of HFT on 22 US stocks' price volatility and spread, conducting a time analysis and an event study with a dataset retrieved from CRSP. My time analysis results suggest that HFT significantly lowers intra-day spread over time but does not particularly affect closing spread. It seems that HFT also has a small but significant negative effect on stock volatility. The event study shows concurring results for volatility but contradictory results for spreads. In both cases precaution is required as no causality between HFT and market effect can be inferred.
Book Synopsis The High Frequency Game Changer by : Paul Zubulake
Download or read book The High Frequency Game Changer written by Paul Zubulake and published by John Wiley & Sons. This book was released on 2011-04-05 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.
Book Synopsis Quantitative Equity Portfolio Management by : Ludwig B Chincarini
Download or read book Quantitative Equity Portfolio Management written by Ludwig B Chincarini and published by McGraw Hill Professional. This book was released on 2010-08-18 with total page 658 pages. Available in PDF, EPUB and Kindle. Book excerpt: Quantitative Equity Portfolio Management brings the orderly structure of fundamental asset management to the often-chaotic world of active equity management. Straightforward and accessible, it provides you with nuts-and-bolts details for selecting and aggregating factors, building a risk model, and much more.
Book Synopsis Food Price Volatility and Its Implications for Food Security and Policy by : Matthias Kalkuhl
Download or read book Food Price Volatility and Its Implications for Food Security and Policy written by Matthias Kalkuhl and published by Springer. This book was released on 2016-04-12 with total page 620 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides fresh insights into concepts, methods and new research findings on the causes of excessive food price volatility. It also discusses the implications for food security and policy responses to mitigate excessive volatility. The approaches applied by the contributors range from on-the-ground surveys, to panel econometrics and innovative high-frequency time series analysis as well as computational economics methods. It offers policy analysts and decision-makers guidance on dealing with extreme volatility.
Book Synopsis High Frequency Trading and Limit Order Book Dynamics by : Ingmar Nolte
Download or read book High Frequency Trading and Limit Order Book Dynamics written by Ingmar Nolte and published by Routledge. This book was released on 2016-04-14 with total page 325 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book brings together the latest research in the areas of market microstructure and high-frequency finance along with new econometric methods to address critical practical issues in these areas of research. Thirteen chapters, each of which makes a valuable and significant contribution to the existing literature have been brought together, spanning a wide range of topics including information asymmetry and the information content in limit order books, high-frequency return distribution models, multivariate volatility forecasting, analysis of individual trading behaviour, the analysis of liquidity, price discovery across markets, market microstructure models and the information content of order flow. These issues are central both to the rapidly expanding practice of high frequency trading in financial markets and to the further development of the academic literature in this area. The volume will therefore be of immediate interest to practitioners and academics. This book was originally published as a special issue of European Journal of Finance.
Book Synopsis Real Effects of High Frequency Trading by : Thomas A. Hanson
Download or read book Real Effects of High Frequency Trading written by Thomas A. Hanson and published by . This book was released on 2014 with total page 181 pages. Available in PDF, EPUB and Kindle. Book excerpt: High frequency trading (HFT) has revolutionized the functioning of modern equity markets, with high-speed algorithms now constituting the majority trading volume. To date, the academic literature has focused on the microstructural effects of these changes, among them changes in liquidity, volatility, and market fragmentation. This dissertation shifts the focus to the effects that HFT can have on decisions made within firms and their subsequent valuation by the market. Specifically, I explore HFT's effects on three corporate finance variables: the quality of corporate governance, the value of the firm, and the value of cash held on the balance sheet. In all cases, the effect of HFT is detrimental to firms. Corporate governance becomes less democratic, firm value declines, and the market gives a lower value to cash on the balance sheet. Previous work has established links between market activity and decisions made at firms. Two channels have been theorized based on information aggregation and liquidity. Therefore, I also explore four possible mechanisms through which HFT could conceivably affect corporate finance: liquidity, volatility, blockholders, and corporate governance. Each of these mechanisms is significant in some cases, reinforcing the reflexive and interconnected nature of markets, corporate governance, and firm value. The overall results suggest the existence of negative externalities from HFT activity. Such effects should factor into the ongoing debate on regulation and market structure. Future research ideas are also suggested to continue exploring the relationship between market microstructure and corporate finance.
Download or read book Deutsche Bank written by Wetfeet and published by Wetfeet. This book was released on 2006 with total page 102 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Implications of High-frequency Trading for Security Markets by : Oliver Linton
Download or read book Implications of High-frequency Trading for Security Markets written by Oliver Linton and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
