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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

Albert J. Menkveld

VU University Amsterdam; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 2016

Abstract

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

Menkveld, Albert J., The Economics of High-Frequency Trading: Taking Stock (June 1, 2016). Annual Review of Financial Economics, Volume 8, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2787542

Albert J. Menkveld (Contact Author)

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands
+31 20 5986130 (Phone)
+31 20 5986020 (Fax)

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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