Do High-Frequency Traders Anticipate Buying and Selling Pressure?

Hirschey, N (2013) Do High-Frequency Traders Anticipate Buying and Selling Pressure? Working Paper. Social Science Research Network.

Abstract

This study provides evidence that high-frequency traders (HFTs) identify patterns in past trades and orders that allow them to anticipate and trade ahead of other investors’ order flow. Specifically, HFTs’ aggressive purchases and sales lead those of other investors, and this effect is stronger at times when it is more difficult for non-HFTs to disguise their order flow. There is also persistence in which HFTs’ trading predicts non-HFT order flow the best, indicating a subset of HFTs are either more skilled or more focused on anticipatory strategies. The results are not explained by HFTs reacting faster to news or past returns, by contrarian or trend-chasing behavior by non-HFTs, or by trader misclassification. These findings support the existence of an anticipatory trading channel through which HFTs increase non-HFT trading costs.

More Details

Item Type: Monograph (Working Paper)
Subject Areas: Finance
Date Deposited: 07 Jun 2019 08:24
Last Modified: 21 Nov 2024 02:52
URI: https://lbsresearch.london.edu/id/eprint/1181
More

Export and Share


Download

Full text not available from this repository.

Statistics

Altmetrics
View details on Dimensions' website

Downloads from LBS Research Online

View details

Actions (login required)

Edit Item Edit Item