Posts Tagged ‘HF Data

26
Jul
11

Paper: Hedge Funds, exposiciones, riesgos

On the High-Frequency Dynamics of Hedge Fund Risk Exposures

Abstract: 
We propose a new method to model hedge fund risk exposures using relatively high frequency conditioning variables. In a large sample of funds, we find substantial evidence that hedge fund risk exposures vary across and within months, and that capturing within-month variation is more important for hedge funds than for mutual funds. We consider different within-month functional forms, and uncover patterns such as day-of-the-month variation in risk exposures. We also find that changes in portfolio allocations, rather than changes in the risk exposures of the underlying assets, are the main drivers of hedge funds’ risk exposure variation.

Link al Paper

22
Mar
11

Gráfico du Jour: HFT Bots

(Fuente: SEC, via WSJ)

02
Mar
11

Paper: Modelos HFT

Developing High-Frequency Equities Trading Models

Link al Paper

____________________________

UPDATE

Llegamos a este paper via Quantivity, uno de los co-autores es un argentino suelto en NY, esperamos que cuando este en Buenos Aires y tenga tiempo nos pueda presentar su trabajo sobre HFT.

21
Feb
11

Paper: Flash Crash, el impacto del HFT

The Flash Crash: The Impact of High Frequency Trading on an Electronic Market

Abstract:
The Flash Crash, a brief period of extreme market volatility on May 6, 2010 raised questions about the current structure of the U.S. financial markets. We use audit-trail data to describe the structure of the E-mini S&P 500 stock index futures market on May 6. We ask three questions. How did High Frequency Traders (HFTs) trade on May 6? What may have triggered the Flash Crash? What role did HFTs play in the Flash Crash? We conclude that HFTs did not trigger the Flash Crash, but their responses to the unusually large selling pressure on that day exacerbated market volatility.

Link al Paper

06
Oct
10

Gráfico du Jour: HFT en el tiempo

(Fuente: JP Morgan, via FT Alphaville)

18
Sep
10

Paper: HFT y su impacto

High Frequency Trading and its Impact on Market Quality

Abstract:
This paper examines the impact of high frequency traders (HFTs) on equities markets. I analyze a unique data set to study the strategies utilized by HFTs, their profitability, and their relationship with characteristics of the overall market, including liquidity, price efficiency, and volatility. I find that in my sample HFTs participate in 77% of all trades and that they tend to engage in a price-reversal strategy. I find no evidence suggesting HFTs withdraw from markets in bad times or that they engage in abnormal front-running of large non-HFTs trades. The 26 high frequency trading (HFT) firms in the sample earn approximately $3 billion in profits annually. HFTs demand liquidity for 50.4% of all trades and supply liquidity for 51.4% of all trades. HFTs tend to demand liquidity in smaller amounts, and trades before and after a HFT demanded trade occur more quickly than other trades. HFTs provide the inside quotes approximately 50% of the time. In addition if HFTs were not part of the market, the average trade of 100 shares would result in a price movement of $.013 more than it currently does, while a trade of 1000 shares would cause the price to move an additional $.056. HFTs are an integral part of the price discovery process and price efficiency. Utilizing a variety of measures introduced by Hasbrouck (1991a, 1991b, 1995), I show that HFTs trades and quotes contribute more to price discovery than do non-HFTs activity. Finally, HFT reduces volatility. By constructing a hypothetical alternative price path that removes HFTs from the market, I show that the volatility of stocks is roughly unchanged when HFT initiated trades are eliminated and significantly higher when all types of HFT trades are removed.

Link al Paper

14
Jul
10

Paper: HFT y la microestructura del mercado

Is high-frequency trading inducing changes inmarket microstructure and dynamics?

Abstract
Using high-frequency time series of stock prices and share volumes sizes from January 2002-May 2009, this paper investigates whether the effects of the onset of high-frequency trading, most prominent since 2005, are apparent in the dynamics of the dollar traded volume. Indeed it is found in almost all of 14 heavily traded stocks, that there has been an increase in the Hurst exponent of dollar traded volume from Gaussian noise in the earlier years to more self-similar dynamics in later years. This shift is linked both temporally to the Reg NMS reforms allowing high-frequency trading to flourish as well as to the declining average size of trades with smaller trades showing markedly higher degrees of self-similarity.
Link al Paper

30
Jun
10

Sobre HFT, Wilmott palabras mayores…

Llegue de casualidad, via el blog Zero Hedge, a un postescrito por Paul Wilmott– sobre High Frequency Trading y su impacto en la liquidez y en la volatilidad de los mercados (Como diría un profesor de economía que tuve, “¿pero de que mercados me hablan?” cuando exigía claridad en los términos).

(…)

I am concerned about High-frequency Trading (HFT) for two main reasons: Reduction of the relationship between value and price; Potential for positive feedback.

(…)

But feedback can be positive or negative.

Negative feedback is when an up move in a stock leads to a sell signal, and thus a fall in the price, and a down leads to a buy, and thus a rise in the price. This dampens volatility.

Positive feedback is when an up begets a buy, which causes the stock to rise again, causing another buy, etc. etc. And when a fall begets a sell, causing another fall, and further selling, and…

So which is it? Does HFT result in a reduction of volatility via negative feedback or an increase via positive feedback? This is an easy one. If you are a hedge fund manager which of the following would you prefer? A or B?

A. Low volatility. Shares go up or go down fairly predictably. No skill is required to make money, even by the man on the street. Hedge funds can’t charge large fees.

B. High volatility. Very difficult markets, experts needed and can charge large fees. If a fund does well they make a killing because of the enormous profit they have made for their clients. But they are just as likely to lose all their clients’ money, in which case…nothing bad happens to the fund manager.

Yes, we are in that familiar territory of moral hazard. Of course the funds want to increase volatility and they have found themselves in exactly the place they want to be to make this happen.

(…)

14
Jun
10

Las acciones favoritas de los HFT traders

(Fuente: Zero Hedge)

19
May
10

Regulación Financiera, dark pools y flash trading

Vox tiene un post sobre un tema donde la libre y la tortuga no condicen con su Fabula.

(…)

According to the Securities and Exchange Commission, the number of active dark pools dealing in stocks on major US stock markets trebled to 29 in 2009 from about 10 in 2002. For April to June 2009, the total dark pools volume was about 7.2% of the total volumes of all US exchanges.

(…)

Dark pools are a private or alternative trading system that allows participants to transact without displaying quotes publicly. Orders are anonymously matched and not reported to any entity, even the regulators (Younglai and Spicer 2009). Thus, the mainstream exchange-traded market does not have any clue about the volume of transactions happening in this parallel market or the prices at which they are being executed. Obviously, price discovery on the mainstream market, without dark pools information, becomes inefficient.

(…)

But what is unacceptable is the practice of allowing a privileged minority to flash trade to track the reaction with high-speed processing capacity and the algorithm that can take advantage of the reaction to reap benefits – as this is akin to front-running. It is an example of high-frequency trading system with knowledge of asymmetric information that confuses common investors by simultaneously issuing and cancelling orders and entices them to shell out more for a particular security and, thus, squeezes out their profits.

It was the Chicago Board Options Exchange which pioneered flash orders early this decade to increase its execution speed (Patterson et al. 2009). Flash orders remained in the dark until a newspaper report in 2009 blew the whistle on how Goldman Sachs had made a killing through this route. According to Rosenblatt, flash trading accounted for about 2.4% of the total US stock volumes in June 2009.

(…)

Por ultimo, una de las fuentes de este articulo es un trabajo de PWCDark Pools of liquidity




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