Fu, Servanna Mianjun and Kellard, Neil and Verousis, Thanos and Kalaitzoglou, Iordanis (2024) High Frequency Trading and Stock Herding. Working Paper. Essex Finance Centre Working Papers. (Unpublished)
Fu, Servanna Mianjun and Kellard, Neil and Verousis, Thanos and Kalaitzoglou, Iordanis (2024) High Frequency Trading and Stock Herding. Working Paper. Essex Finance Centre Working Papers. (Unpublished)
Fu, Servanna Mianjun and Kellard, Neil and Verousis, Thanos and Kalaitzoglou, Iordanis (2024) High Frequency Trading and Stock Herding. Working Paper. Essex Finance Centre Working Papers. (Unpublished)
Abstract
Using Trade and Quote (TAQ) data to infer variation in High frequency Trading (HFT) for the US equity markets and HFT start and colocation dates for a sample of 10 international exchanges, we find that increases in HFT activity lead to a significant increase in stock herding. The effect of HFT on herding is more pronounced for large-cap stocks, higher liquidity periods and during more volatile days. HFT activities are strongly associated with non-fundamental herding and encourage information cascades that induce price inefficiencies, suggesting changes to market design might be warranted.
| Item Type: | Monograph (Working Paper) |
|---|---|
| Uncontrolled Keywords: | High Frequency Trading; HFT; Herding; Colocation; Information cascades; Fundamental information |
| Divisions: | Faculty of Social Sciences > Essex Business School |
| SWORD Depositor: | Unnamed user with email elements@essex.ac.uk |
| Depositing User: | Unnamed user with email elements@essex.ac.uk |
| Date Deposited: | 03 Jan 2024 14:29 |
| Last Modified: | 03 Jan 2024 14:30 |
| URI: | http://repository.essex.ac.uk/id/eprint/37485 |