Work detail

The Impact of High Frequency Trading on Price Volatility

Author: Mgr. Jakub Vondřička
Year: 2014 - summer
Leaders: Mgr. Lukáš Vácha Ph.D.
Consultants:
Work type: Economic Theory
Masters
Language: English
Pages: 79
Awards and prizes:
Link: https://is.cuni.cz/webapps/zzp/detail/138387/
Abstract: This thesis examines an impact of high frequency trading on equity market qualities. As an indicator of
market quality, stock prices realized volatility is used. To estimate the high frequency trading activity,
we implement a special method of identification of high frequency orders from quote data. Study of
relation between high frequency trading and market qualities is incited by growing concerns about the
welfare impacts of high frequency trading and connected activities. In order to test the dependence and
causality between high frequency trading activity and volatility, we implement time-scale estimation
techniques. Wavelet coherence is used to study localized dependence. The analysis is amended by a
robustness check, using wavelet correlation. Results show inconsistent dependence at short trading
horizons and regions of significant continuous dependence at trading horizons within hours

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