High-frequency quoting, trading, and the efficiency of prices

• 成果类型: Article
• 署名作者: Conrad, Jennifer; Wahal, Sunil; Xiang, Jin
• 署名单位: University of North Carolina; University of North Carolina Chapel Hill; Arizona State University; Arizona State University-Tempe
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2015.02.008
• 发表日期: 2015
• 页码: 271-291
• 关键词: High frequency trading; Market microstructure; market efficiency

摘要

We examine the relation between high frequency quotation and the behavior of stock prices between 2009 and 2011 for the full cross section of securities in the US. On average, higher quotation activity is associated with price series that more closely resemble a random walk, and significantly lower cost of trading. We also explore market resiliency during periods of exceptionally high low-latency trading: large liquidity drawdowns in which, within the same millisecond, trading algorithms systematically sweep large volume across multiple trading venues. Although such large drawdowns incur trading costs, they do not appear to degrade the price formation process or increase the subsequent cost of trading. In an out-of-sample analysis, we investigate an exogenous technological change to the trading environment on the Tokyo Stock Exchange that dramatically reduces latency and allows co-location of servers. This shock also results in prices more closely resembling a random walk and a sharp decline in the cost of trading. (C) 2015 Elsevier B.V. All rights reserved.