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Correlated High-Frequency Trading

  • 2017.02.06
  • Event
Correlated High-Frequency Trading

Topic:

Correlated High-Frequency Trading

Date:

13/02/2017

Time:

10:00-11:30am

Venue:

Room 502, Daoyuan Building, CUHK (SZ)

Speaker:

Dan Li            

University of Hong Kong

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.