| Autor: |
Jain, Archana, Jain, Chinmay, Khanapure, Revansiddha Basavaraj |
| Předmět: |
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| Zdroj: |
Quarterly Journal of Finance; Mar2021, Vol. 11 Issue 1, pN.PAG-N.PAG, 32p |
| Abstrakt: |
Hendershott et al. (2011, Does Algorithmic Trading Improve Liquidity? Journal of Finance 66, 1–33) show that algorithmic traders improve liquidity in equity markets. An equally important and unanswered question is whether they improve liquidity when information asymmetry is high. We use days surrounding earnings announcement as a period of high information asymmetry. First, we follow Hendershott et al. (2011, Does Algorithmic Trading Improve Liquidity? Journal of Finance 66, 1–33) to use introduction of NYSE autoquote as a natural experiment. We find that increased algorithmic trading (AT) as a result of NYSE autoquote does not improve liquidity around earnings announcements. Next, we use trade-to-order volume % and cancel rate as a proxy for algorithmic trading and find that abnormal spreads surrounding the days of earnings announcement are significantly higher for stocks with higher AT. Our findings indicate that algorithmic traders reduces their role of liquidity provision in markets when information asymmetry is high. These findings shed further light on the role of liquidity provision by algorithmic traders in the financial markets. [ABSTRACT FROM AUTHOR] |
| Databáze: |
Complementary Index |
| Externí odkaz: |
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