High frequency trading and comovement in financial markets

• 成果类型: Article
• 署名作者: Malceniec, Laura; Malcenieks, Karlis; Putnins, Talis J.
• 署名单位: University of Technology Sydney
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2018.02.015
• 发表日期: 2019
• 页码: 381-399
• 关键词: High frequency trading; HFT; comovement; COMMONALITY; liquidity

摘要

Using the staggered entry of Chi-X in 12 European equity markets as a source of exogenous variation in high frequency trading (HFT), we find that HFT causes significant increases in comovement in returns and in liquidity. About one-third of the increase in return comovement is due to faster diffusion of market-wide information. We attribute the remaining two-thirds to correlated trading strategies of HFTs. The increase in liquidity comovement is consistent with HFT liquidity providers being better able to monitor other stocks and adjust their liquidity provision accordingly. Our findings suggest a channel by which HFT impacts the cost of capital. (C) 2019 Elsevier B.V. All rights reserved.