Very Fast Money: High-Frequency Trading on the NASDAQ
University of Utah - Department of Finance
June 15, 2013
Forthcoming, Journal of Financial Markets
This paper provides evidence regarding high-frequency trader (HFT) trading performance, trading costs, and effects on market efficiency using a sample of NASDAQ trades and quotes that directly identifies HFT participation. I find that HFTs engage in successful intra-day market timing, spreads are wider when HFTs provide liquidity and tighter when HFTs take liquidity, and prices incorporate information from order flow and market-wide returns more efficiently on days when HFT participation is high.
Number of Pages in PDF File: 86
Keywords: high-frequency trading, trading performance, intraday return predictability, VWAP, trading costs, adverse selection, market efficiency
JEL Classification: G1, G2
Date posted: August 2, 2012 ; Last revised: June 25, 2013
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