High-Frequency Trading and Price Informativeness
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Datum
2019-03-01
Autor
Gider, Jasmin
Schmickler, Simon
Westheide, Christian
SAFE No.
248
Neuere Version
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Zusammenfassung
We study how the informativeness of stock prices changes with the presence of high-frequency trading (HFT). Our estimate is based on the staggered start of HFT participation in a panel of international exchanges. With HFT presence, market prices are a less reliable predictor of future cash flows and investment, even more so for longer horizons. Further, firm-level idiosyncratic volatility decreases, and the holdings and trades by institutional investors deviate less from the market-capitalization weighted portfolio as a benchmark. Our results document that the informativeness of prices decreases subsequent to the start of HFT. These findings are consistent with theoretical models of HFTs' ability to anticipate informed order flow, resulting in decreased incentives to acquire fundamental information.
Forschungsbereich
Corporate Finance
Financial Markets
Financial Markets
Schlagworte
high-frequency trading, price efficiency, information acquisition, information production
JEL-Klassifizierung
G10, G14
Forschungsdaten
Thema
Corporate Finance
Saving and Borrowing
Trading and Pricing
Saving and Borrowing
Trading and Pricing
Beziehungen
1
Publikationstyp
Working Paper
Link zur Publikation
Collections
- LIF-SAFE Working Papers [334]