High-frequency, Algorithmic Spillovers Between NASDAQ and Forex / Takatoshi Ito, Masahiro Yamada.

Format:

Book

Author/Creator:

Ito, Takatoshi.

Contributor:

National Bureau of Economic Research.

Yamada, Masahiro.

Series:

Working Paper Series (National Bureau of Economic Research) no. w21122.

NBER working paper series no. w21122

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2015.

Summary:

We empirically examine the order flows spillovers between Nasdaq and the Forex markets in 2008 and 2009. With emphasis on a role of high-frequency traders (HFTs) who aggregate information between the two markets as well as within each market, our results show that HFTs in Nasdaq trade intensively on the market-wide information more rapidly than other market participants, and that their order flows contain more information about the Forex rates than those of the Forex themselves. As a result, order flows by HFTs in Nasdaq significantly lead those in the Forex activities. Reflecting each market's exposures to the common shocks during the Global Financial crisis, these spillovers vary over time, and HFTs have increased their influences. These empirical results are consistent with theoretical predictions of the rational expectations model of multi-asset trading.

Notes:

Print version record

April 2015.