[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/cth/wpaper/gru_2017_018.html
   My bibliography  Save this paper

Risk and Return in High-Frequency Trading

Author

Listed:
  • Matthew Baron

    (University of Warwick)

  • Björn Hagströmer

    (Stockholm University)

  • Andrei Kirilenko

    (Imperial College London)

Abstract
We study performance and competition among high-frequency traders (HFTs). We construct measures of latency and find that differences in relative latency account for large differences in HFTs’ trading performance. HFTs that improve their latency rank due to colocation upgrades see improved trading performance. The stronger performance associated with speed comes through both the short-lived information channel and the risk management channel, and speed is useful for various strategies including market making and cross-market arbitrage. We find empirical support for many predictions regarding relative latency competition.

Suggested Citation

  • Matthew Baron & Björn Hagströmer & Andrei Kirilenko, 2017. "Risk and Return in High-Frequency Trading," GRU Working Paper Series GRU_2017_018, City University of Hong Kong, Department of Economics and Finance, Global Research Unit.
    • Handle: RePEc:cth:wpaper:gru_2017_018
    as

    Download full text from publisher

    File URL: https://www.cb.cityu.edu.hk/ef/doc/GRU/WPS/GRU%232017-018%20Baron%20et%20al.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    More about this item

    Keywords

    high-frequency trading; low latency; market microstructure;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G19 - Financial Economics - - General Financial Markets - - - Other

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cth:wpaper:gru_2017_018. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: GRU (email available below). General contact details of provider: https://edirc.repec.org/data/decithk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.