Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/87562
Authors: 
Scholtus, Martin L.
van Dijk, Dick
Frijns, Bart
Year of Publication: 
2012
Series/Report no.: 
Tinbergen Institute Discussion Paper 12-121/III
Abstract: 
This paper documents that speed is crucially important for high frequency trading strategies based on U.S. macroeconomic news releases. Using order level data of the highly liquid S&P500 ETF traded on NASDAQ from January 6, 2009, to December 12, 2011, we find that a delay of 300 milliseconds (1 second) significantly reduces returns by 3.08% (7.33%) compared to instantaneous execution over all announcements in the sample. This reduction is stronger in case of high impact news and on days with high volatility. In addition, we assess the effect of algorithmic trading on market quality around macroeconomic news. Increases in algorithmic trading activity have a positive (mixed) effect on market quality measures when we use algorithmic trading proxies that capture the top of the orderbook (full orderbook).
Subjects: 
Macroeconomic News
High Frequency Trading
Latency Costs
Market Activity
Event-Based Trading
JEL: 
E44
G10
G14
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
1.71 MB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.