High Frequency Quoting: Short-Term Volatility in Bids and Offers
Year: 2013
Type: article
Abstract: At subsecond horizons bids and offers in U.S. equity markets are more volatile than what would be implied by long-term fundamentals. To assess costs and consequences, the paper suggests that traders’ random delays (latencies) interact with quote volatility to generate execution price risk and relative latency costs. Analysis of the behavior of quote setters suggests that this volatility is more likely to arise from recurrent cycles of undercutting similar to the Edgeworth cycles found in product markets, rather than mixed strategies of limit order placement.
Author: Joel Hasbrouck
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3125816435