Our paper “Trading fast and slow: Colocation and liquidity” has been accepted for publication in the Review of Financial Studies. The paper shows that an optional colocation upgrade is pursued primarily by liquidity suppliers. The colocation upgrade leads to improved liquidity, and we show that the improvement is due to the lower inventory costs incurred by the traders who pursue the upgrade.
I am interviewed in this article, published in Swedish in Finansliv. For once an article that highlights both the pros and cons of fast trading.
Our article on the aggressiveness of high-frequency traders has been accepted for publication in a special issue on HFT in The Financial Review.
The aggressiveness of HFTs
In this new working paper, which is joint with Lars Nordén and Dong Zhang, we study limit order submissions by various trader groups. In particular, we are interested in how the order decision is influenced by market conditions. Our evidence supports the notion that HFTs stabilize markets by supplying more liquidity when it is expensive.
Is high-frequency trading good or bad for financial markets? That was the question at this university talkshow that is now available online.
Trading fast and slow: Colocation and market quality
This is joint work with Jonathan Brogaard, Lars Nordén, and Ryan Riordan, using data from Nasdaq OMX Stockholm. We study the speed advantage enjoyed by traders who choose to pay for colocation, and find that it gives a measurable advantage in trading performance. We also find that an upgrade to the colocation services is associated with improved market quality.
Professor of Finance at Stockholm Business School, Stockholm University, doing research on financial market microstructure, with applications to asset pricing, financial econometrics, and liquidity measurement.
Photo by Maria Stoetzer
Our first paper on commonality in illiquidity is now published as a working paper at the Federal Reserve Bank of St Louis. The paper can be downloaded here.
My article The Diversity of High-Frequency Traders, coauthored with Lars Nordén, has been accepted for publication in a special issue on HFT, due to come out soon in the Journal of Financial Markets. This summer we are also presenting the article at the WFA in Lake Tahoe and at the EFA in Cambridge.
The key finding of this article is that all HFTs are not the same. We show that a group of HFTs that serve as voluntary market-makers at the Swedish equity market behave very differently from other HFTs at the same market. We also find that market-making HFT activity reduces short-term price fluctuations.
This is our first article in a series of studies planned on HFTs at the Swedish stock market. The data is provided by NASDAQ-OMX Stockholm.