High-Frequency Trading and Price Discovery

• 成果类型: Article
• 署名作者: Brogaard, Jonathan; Hendershott, Terrence; Riordan, Ryan
• 署名单位: University of Washington; University of Washington Seattle; University of California System; University of California Berkeley; Western University (University of Western Ontario)
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhu032
• 发表日期: 2014
• 页码: 2267
• 关键词: information-content; empirical-analysis; FLOW TOXICITY; MARKET; liquidity; transactions

摘要

We examine the role of high-frequency traders (HFTs) in price discovery and price efficiency. Overall HFTs facilitate price efficiency by trading in the direction of permanent price changes and in the opposite direction of transitory pricing errors, both on average and on the highest volatility days. This is done through their liquidity demanding orders. In contrast, HFTs' liquidity supplying orders are adversely selected. The direction of HFTs' trading predicts price changes over short horizons measured in seconds. The direction of HFTs' trading is correlated with public information, such as macro news announcements, market-wide price movements, and limit order book imbalances.