Abstract

http://ssrn.com/abstract=2237499
 
 

Citations (2)



 
 

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High Frequency Quoting: Short-Term Volatility in Bids and Offers


Joel Hasbrouck


New York University (NYU) - Department of Finance

January 20, 2015


Abstract:     
At subsecond horizons bids and offers in US equity markets are more volatile than what would be implied by long-term fundamentals. In considering underlying causes, the evidence suggests that this volatility is not likely to arise from quote-stuffing, spoofing, or mixed-strategy behavior, but more likely reflects Edgeworth cycles (recurrent phases of undercutting). To assess costs and consequences, the paper proposes a model wherein traders’ random delays (latencies) interact with quote volatility to generate execution price risk and relative latency costs. Finally, over the 2001-2011 period, despite high growth in quote traffic, quote volatility does not display a strong trend.

Number of Pages in PDF File: 56

Keywords: high frequency trading, high frequency quoting, quotes, volatility

JEL Classification: G10, G19


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Date posted: March 24, 2013 ; Last revised: February 23, 2015

Suggested Citation

Hasbrouck, Joel, High Frequency Quoting: Short-Term Volatility in Bids and Offers (January 20, 2015). Available at SSRN: http://ssrn.com/abstract=2237499 or http://dx.doi.org/10.2139/ssrn.2237499

Contact Information

Joel Hasbrouck (Contact Author)
New York University (NYU) - Department of Finance ( email )
44 West 4th Street
MEC Suite 9-190, Mail Code 0268
New York, NY 10012-1126
United States
212-998-0310 (Phone)
212-995-4233 (Fax)
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