High-frequency trading and price informativeness

Arbeitspapier

We study how stock price informativeness changes with the presence of highfrequency trading (HFT). Our estimate is based on the staggered start of HFT participation in a panel of international exchanges. With HFT presence market prices are a less reliable predictor of future cash ows and investment, even more so for longer horizons. Further, idiosyncratic volatility decreases, mutual funds trade less actively and their holdings deviate less from the market-capitalization weighted portfolio. These findings suggest that price informativeness declines with HFT presence, consistent with theoretical models of HFTs' ability to anticipate informed order ow, reducing incentives to acquire fundamental information.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SAFE Working Paper ; No. 248

Classification and Topics

• Classification: Wirtschaft ; General Financial Markets: General (includes Measurement and Data) ; Information and Market Efficiency; Event Studies; Insider Trading
• Subject: High-Frequency Trading ; Price Efficiency ; Information Acquisition ; Information Production

Contributors, Location and Time

• Event: Geistige Schöpfung
• (who): Gider, Jasmin ; Schmickler, Simon ; Westheide, Christian
• Event: Veröffentlichung
• (who): Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe
• (where): Frankfurt a. M.
• (when): 2019

Further information

• DOI: doi:10.2139/ssrn.3349653
• Handle: http://hdl.handle.net/10419/203324
• Last update: 10.03.2025, 11:45 AM CET