The Economics of High-Frequency Trading: Taking Stock
Annual Review of Financial Economics, Volume 8, Forthcoming
28 Pages Posted: 9 Jun 2016 Last revised: 28 Jul 2016
Date Written: June 1, 2016
I review the recent high-frequency trader (HFT) literature to single out the economic channels by which HFTs affect market quality. I first group the various theoretical studies according to common denominators and discuss the economic costs and benefits they identify. I then, for each group, review the empirical literature that either speaks to the models' assumptions or their predictions. This enables me to come to a "data-weighted" judgement on the economic value of HFTs.
Keywords: high-frequency trading, literature survey
JEL Classification: G1, G2
Suggested Citation: Suggested Citation