Acta Univ. Agric. Silvic. Mendelianae Brun. 2016, 64, 1911-1918

https://doi.org/10.11118/actaun201664061911
Published online 2016-12-21

Aggressive and Defensive High‑Frequency Trading and its Impact on Liquidity of German Stock Market

Juraj Hruška

Department of Finance, Faculty of Economics and Administration, Masaryk University in Brno, Lipová 41a, 602 00 Brno, Czech Republic

References

1. ALDRIDGE, I. 2013. High-frequency trading: a practical guide to algorithmic strategies and trading systems. Hoboken, New Jersey: John Wiley and Sons, Inc.
2. ARELLANO, M. 1987. Computing Robust Standard Errors for Within Group Estimators. Oxford bulletin of Economics and Statistics, (49)4.
3. ATTARI, M., MELLO, A. S., RUCKES, M. E. 2005. Arbitraging arbitrageurs. The Journal of Finance, 60(5): 2471-251. <https://doi.org/10.1111/j.1540-6261.2005.00805.x>
4. BALTAGI, B. 2008. Econometric analysis of panel data. 1st ed. Hoboken, New Jersey: John Wiley and Sons.
5. BALTAGI, B. H., and LI, Q. 1995. Testing AR (1) against MA (1) disturbances in an error component model. Journal of Econometrics, 68(1): 133–151. <https://doi.org/10.1016/0304-4076(94)01646-H>
6. BANDI, F. M., and RUSSELL, J. R. 2008. Microstructure noise, realized variance, and optimal sampling. The Review of Economic Studies, 75(2): 339–369. <https://doi.org/10.1111/j.1467-937X.2008.00474.x>
7. BERA, A. K., SOSA-ESCUDERO, W., and YOON, M. 2001. Tests for the error component model in the presence of local misspecification. Journal of Econometrics, 101(1): 1–23. <https://doi.org/10.1016/S0304-4076(00)00071-3>
8. BERTSIMAS, D., LO, A. W. 1998. Optimal control of execution costs. Journal of Financial Markets, 1(1), 1–50. <https://doi.org/10.1016/S1386-4181(97)00012-8>
9. BESSEMBINDER, H., 2003. Quote-based competition and trade execution costs in NYSE‑listed stocks. Journal of Financial Economics, 70(3): 385–422. <https://doi.org/10.1016/S0304-405X(03)00168-5>
10. BIAIS, B., MARTIMORT, D., ROCHET, J. C. 2000. Competing mechanisms in a common value environment. Econometrica, 68(4): 799–837. <https://doi.org/10.1111/1468-0262.00138>
11. BROGAARD, J., 2011. High frequency trading and volatility. SSRN eLibrary.
12. BROGAARD, J., HENDERSHOTT, T., RIORDAN, R. 2014. High-frequency trading and price discovery. Review of Financial Studies, 27(8): 2267–2306. <https://doi.org/10.1093/rfs/hhu032>
13. BROOKS, C. 2014. Introductory econometrics for finance. 3rd ed. Cambridge: Cambridge University Press.
14. BRUNNERMEIER, M. K., PEDERSEN, L. H. 2009. Market liquidity and funding liquidity. Review of Financial studies, 22(6): 2201–2238. <https://doi.org/10.1093/rfs/hhn098>
15. CHABOUD, A. P., CHIQUOINE, B., HJALMARSSON, E., and VEGA, C. 2014. Rise of the machines: Algorithmic trading in the foreign exchange market. The Journal of Finance, 69(5): 2045–2084. <https://doi.org/10.1111/jofi.12186>
16. COMERTON-FORDE, C., HENDERSHOTT, T., JONES, CH. M., MOULTON P. C., SEASHOLES, M. S. 2010. Time Variation in Liquidity: The Role of Market-Maker Inventories and Revenues. The Journal of Finance, 65(1): 295–331. <https://doi.org/10.1111/j.1540-6261.2009.01530.x>
17. COPELAND, T. E., GALAI, D. 1983. Information effects on the bid‑ask spread. The Journal of Finance, 38(5): 1457–1469. <https://doi.org/10.1111/j.1540-6261.1983.tb03834.x>
18. COUGHENOUR, J. F., SAAD, M. M. 2004. Common market makers and commonality in liquidity. Journal of Financial Economics, 73(1): 37–69. <https://doi.org/10.1016/j.jfineco.2003.05.006>
19. FOUCAULT, T., KADAN, O., and KANDEL, E. 2013. Liquidity cycles and make/take fees in electronic markets. The Journal of Finance, 68(1), 299–341. <https://doi.org/10.1111/j.1540-6261.2012.01801.x>
20. FOUCAULT, T., ROELL, A., SANDÅS, P. 2003. Market making with costly monitoring: An analysis of the SOES controversy. Review of Financial Studies 16(2): 345–384. <https://doi.org/10.1093/rfs/hhg005>
21. FRINO, A., MOLLICA, V., WEBB, R. I. 2013. The Impact of Co-Location of Securities Exchanges’ and Traders’ Computer Servers on Market Liquidity. Journal of Futures Markets, 34(1): 20–33. <https://doi.org/10.1002/fut.21631>
22. GLOSTEN, L. R. 1994. Is the electronic open limit order book inevitable?. The Journal of Finance, 49(4), 1127–1161. <https://doi.org/10.1111/j.1540-6261.1994.tb02450.x>
23. GROMB, D., VAYANOS, D. 2002. Equilibrium and welfare in markets with financially constrained arbitrageurs. Journal of Financial Economics, 66(2): 361–407. <https://doi.org/10.1016/S0304-405X(02)00228-3>
24. GSELL, M., AND GOMBER, P. 2009. Algorithmic trading engines versus human traders-Do they behave different in securities markets?. In ECIS 98–109.
25. HAUSMAN, J. A. 1978. Specification tests in econometrics. Econometrica: Journal of the Econometric Society, 1251-1271.
26. HENDERSHOTT, T., JONES CH. M., MENKVELD A. J. 2011a. Does Algorithmic Trading Improve Liquidity?. The Journal of Finance, 66(1), 1–33 <https://doi.org/10.1111/j.1540-6261.2010.01624.x>
27. HENDERSHOTT, T., MOULTON, P. C. 2011b. Automation, speed, and stock market quality: The NYSE’s hybrid. Journal of Financial Markets, 14(4): 568–604. <https://doi.org/10.1016/j.finmar.2011.02.003>
28. HENDERSHOTT, T., RIORDAN, R. 2009. Algorithmic trading and information. Manuscript, University of California, Berkeley.
29. IM, K. S., PESARAN, M. H., AND SHIN, Y. 2003. Testing for unit roots in heterogeneous panels. Journal of econometrics, 115(1): 53-74. <https://doi.org/10.1016/S0304-4076(03)00092-7>
30. JARNECIC, E., AND SNAPE, M. 2014. The Provision of Liquidity by High‑Frequency Participants. Financial Review, 49(2): 371-394. <https://doi.org/10.1111/fire.12040>
31. KENDALL, K. 2007. Electronic and Algorithmic Trading Technology, 1st ed. London: Academic Press, 203.
32. MCGOWAN, M. J. 2010. The Rise of Computerized High Frequency Trading: Use and Controversy. Duke Law and Technology Review, 16(1) .
33. PESARAN, M. H. 2004. General diagnostic tests for cross section dependence in panels. CESifo, Working Paper, (1229)
34. SLAMKA, CH., SKIERA B., SPANN M. 2013. Prediction Market Performance and Market Liquidity: A Comparison of Automated Market Makers. IEEE Transactions on Engineering Management, 60(1): 169–185. <https://doi.org/10.1109/TEM.2012.2191618>
35. STOCK, J. H., AND WATSON, M. W. 2008. Heteroskedasticity‑robust standard errors for fixed effects panel data regression. Econometrica, 76(1): 155–174. <https://doi.org/10.1111/j.0012-9682.2008.00821.x>
36. WEILL, P. O. 2007. Leaning against the wind. The Review of Economic Studies, 74(4): 1329–1354. <https://doi.org/10.1111/j.1467-937X.2007.00451.x>
37. WOOLDRIDGE, J. M. 2010. Econometric analysis of cross section and panel data. MIT press.
38. ZHANG, F. 2010. High-frequency trading, stock volatility, and price discovery. SSRN 1691679.
front cover

ISSN 1211-8516 (Print)

ISSN 2464-8310 (Online)

Current issue

Review Management System NEW Indexed in DOAJ

Archive