Slow-moving capital and execution costs: Evidence from a major trading glitch

• 成果类型: Article
• 署名作者: Bogousslavsky, Vincent; Collin-Dufresne, Pierre; Saglam, Mehmet
• 署名单位: Boston College; University System of Ohio; University of Cincinnati
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2020.08.009
• 发表日期: 2021
• 页码: 922-949
• 关键词: Slow-moving capital; Market making; liquidity; Algorithmic trading; Institutional trading costs

摘要

We investigate the impact of an exogenous trading glitch at a high-frequency market-making firm on standard measures of stock liquidity (spreads, price impact, turnover, and depth) and institutional trading costs (implementation shortfall and volume-weighted average price slippage). Stocks in which the firm accumulates large long (short) positions increase (decrease) by about 4% during the glitch and become substantially more illiquid. It takes one day for prices and spread-based liquidity measures to revert. Institutional trading costs, however, remain significantly higher for more than one week. Both liquidity measures are also weakly correlated outside the glitch period, suggesting they capture different aspects of liquidity. (C) 2020 Elsevier B.V. All rights reserved.