Front-Running and Market Quality: An Evolutionary Perspective on High Frequency Trading
| Autor: | Klaus Reiner Schenk-Hoppé, Terje Lensberg, Thorsten Hens |
|---|---|
| Rok vydání: | 2017 |
| Předmět: |
Economics and Econometrics
050208 finance Front running Market portfolio 05 social sciences Monetary economics Investment (macroeconomics) computer.software_genre Microeconomics 0502 economics and business Economics Investment style Profitability index 050207 economics Algorithmic trading High-frequency trading Speculation computer Finance |
| Zdroj: | International Review of Finance. 18:727-741 |
| ISSN: | 1369-412X |
| Popis: | We study front-running by high-frequency traders (HFTs) in a limit order model with continuous trading. The model describes an evolutionary equilibrium of low-frequency traders who compete in portfolio management services by offering investment styles. The introduction of front-runners inflicts heavy losses on speculators, while leaving passive investors relatively unscathed. This encourages investment in the market portfolio and markedly reduces overall turnover. Speculative trading persists despite its lower profitability. By most measures, market quality is not affected to any significant extent by front-running HFTs. |
| Databáze: | OpenAIRE |
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