Fast traders make a quick buck: The role of speed in liquidity provision
| Autor: | Markus Baldauf, Joshua Mollner |
|---|---|
| Rok vydání: | 2022 |
| Předmět: |
History
Economics and Econometrics Polymers and Plastics Financial economics Adverse selection Monetary economics Industrial and Manufacturing Engineering Private investment in public equity Stock exchange 0502 economics and business Business and International Management 050207 economics High-frequency trading Set (psychology) health care economics and organizations Event (probability theory) 050208 finance Event (computing) 05 social sciences Liquidity crisis Market liquidity Identification (information) ComputingMilieux_COMPUTERSANDSOCIETY Fake news Business Finance |
| Zdroj: | Journal of Financial Markets. 58:100621 |
| ISSN: | 1386-4181 |
| DOI: | 10.1016/j.finmar.2021.100621 |
| Popis: | In modern public equity markets, liquidity is provided by a heterogeneous set of traders with vastly different speeds. We study the consequences of information arrival in such a setting. We present a model that predicts faster traders achieve a relative increase in profits obtained from liquidity provision following information events through (i) avoiding adverse selection by canceling mispriced quotes, and (ii) winning the race to post updated quotes. We also find strong support for these model predictions using data from the Toronto Stock Exchange. The identification strategy is based on an unanticipated “fake news” event in which the Twitter feed of the Associated Press falsely reported a terrorist attack. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
|
Full Text from ScienceDirect