High-frequency trading and price informativeness
- 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.
Author: | Jasmin Gider, Simon Schmickler, Christian Westheide |
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URN: | urn:nbn:de:hebis:30:3-492437 |
URL: | https://ssrn.com/abstract=3349653 |
Parent Title (English): | SAFE working paper series ; No. 248 |
Series (Serial Number): | SAFE working paper (248) |
Publisher: | SAFE |
Place of publication: | Frankfurt am Main |
Document Type: | Working Paper |
Language: | English |
Year of Completion: | 2019 |
Year of first Publication: | 2019 |
Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
Release Date: | 2019/04/04 |
Tag: | High-Frequency Trading; Information Acquisition; Information Production; Price Efficiency |
Issue: | March 2019 |
Page Number: | 71 |
HeBIS-PPN: | 448555220 |
Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF) | |
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE) | |
Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
Sammlungen: | Universitätspublikationen |
Licence (German): | Deutsches Urheberrecht |