Correlated High-Frequency Trading
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Topic: |
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Date: |
13/02/2017 |
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Time: |
10:00-11:30am |
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Venue: |
Room 502, Daoyuan Building, CUHK (SZ) |
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Speaker: |
Dan Li University of Hong Kong |
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Detail/ Abstract: |
In this paper, we examine product differentiation in the high-frequency trading (HFT) industry by looking at the correlated behavior of HFT firms. Since the “product” of an HFT firm is a proprietary trading strategy, we use a principal component analysis to detect three underlying strategies that are common to multiple HFT firms. We show that the short-horizon volatility of most stocks loads negatively on the extent of market-wide competition between HFT firms, and document a negative relation between HFT competition and market concentration, presenting evidence that smaller trading venues are more viable when HFT competition is higher. |
