Journal ArticleDOI
Algorithmic Trading and the Market for Liquidity
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TLDR
In this article, the role of algorithmic traders in liquidity supply and demand in the 30 Deutscher Aktien Index stocks on the Deutsche Boerse in Jan. 2008 was examined.Abstract:
We examine the role of algorithmic traders (ATs) in liquidity supply and demand in the 30 Deutscher Aktien Index stocks on the Deutsche Boerse in Jan. 2008. ATs represent 52% of market order volume and 64% of nonmarketable limit order volume. ATs more actively monitor market liquidity than human traders. ATs consume liquidity when it is cheap (i.e., when the bid-ask quotes are narrow) and supply liquidity when it is expensive. When spreads are narrow ATs are less likely to submit new orders, less likely to cancel their orders, and more likely to initiate trades. ATs react more quickly to events and even more so when spreads are wide.read more
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High-Frequency Trading and Price Discovery
TL;DR: In this paper, the role of high-frequency traders (HFTs) in price discovery and price efficiency is examined, and it is shown that HFTs facilitate price efficiency by trading in the direction of permanent price changes and in the opposite direction of transitory pricing errors.
Journal ArticleDOI
Low-latency trading $
Joel Hasbrouck,Gideon Saar +1 more
TL;DR: In this paper, the authors define low-latency activity as strategies that respond to market events in the millisecond environment, the hallmark of proprietary trading by highfrequency traders though it could include other algorithmic activity as well.
Journal ArticleDOI
High frequency market microstructure.
TL;DR: In this article, the authors investigate the implications of technology and high frequency trading for high frequency market microstructure (HFT), with a particular focus on how HFT affects the strategies of traders and markets.
Journal ArticleDOI
The diversity of high-frequency traders ☆
Björn Hagströmer,Lars L. Norden +1 more
TL;DR: In this article, the authors compare market-making HFT strategies to opportunistic HFTs and find that market makers constitute the lion's share of HFT trading volume and limit order traffic.
Journal ArticleDOI
Equilibrium fast trading
TL;DR: In this paper, a single market type on which fast and slow traders coexist and Pigovian taxes on investment in the fast trading technology is proposed. And the authors show that the maximization of welfare is maximized with (i) a one market type for fast traders and (ii) a single tax for slow traders.
References
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Journal ArticleDOI
Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches
TL;DR: In this article, the authors examine the different methods used in the literature and explain when the different approaches yield the same (and correct) standard errors and when they diverge, and give researchers guidance for their use.
Journal ArticleDOI
Inferring Trade Direction from Intraday Data
Charles M.C. Lee,Mark J. Ready +1 more
TL;DR: In this paper, the authors evaluate alternative methods for classifying individual trades as market buy or market sell orders using intraday trade and quote data and identify two serious potential problems with this method, namely, that quotes are often recorded ahead of the trade that triggered them and that trades inside the spread are not readily classifiable.
Book
Essays in Positive Economics
TL;DR: In this paper, Newman's critical blast blows like a north wind against the more pretentious erections of modern economics, however a healthy and invigorating blast, without malice and with a sincere regard for scientific objectivity.
Journal ArticleDOI
Optimal execution of portfolio transactions
Robert Almgren,Neil Chriss +1 more
TL;DR: In this paper, the authors consider the execution of portfolio transactions with the aim of minimizing a combination of volatility risk and transaction costs arising from permanent and temporary market impact, and they explicitly construct the efficient frontier in the space of time-dependent liquidation strategies, which have minimum expected cost for a given level of uncertainty.