High-Frequency Trading and Price Discovery

Jonathan Brogaard, Terrence Hendershott, Ryan Riordan · 2014 · Review of Financial Studies

IntermediateHFTEmpiricalFree to read

HFTs trade in the direction of permanent price changes and against transitory errors. Their market orders are informed; their limit orders get adversely selected.

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At a glance

Level: Intermediate: Comfortable with statistics, regressions and basic probability models
Horizon: HFT
Data needed: Trades, L1 quotes Set what data you have
Themes: HFT & market design Order-flow alpha
Assets: Equities
Market: US

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Cite

@article{brogaard2014high,
  author = {Brogaard, Jonathan and Hendershott, Terrence and Riordan, Ryan},
  title = {{High-Frequency Trading and Price Discovery}},
  journal = {Review of Financial Studies},
  year = {2014},
  doi = {10.1093/rfs/hhu032}
}

Brogaard, J., Hendershott, T., & Riordan, R. (2014). High-Frequency Trading and Price Discovery. Review of Financial Studies. https://doi.org/10.1093/rfs/hhu032