scholarly journals The Impact of Algorithmic Trading in a Simulated Asset Market

2019 ◽  
Vol 12 (2) ◽  
pp. 68 ◽  
Author(s):  
Purba Mukerji ◽  
Christine Chung ◽  
Timothy Walsh ◽  
Bo Xiong
Keyword(s):  
Empirical Work ◽  
Asset Markets ◽  
Asset Market ◽  
Algorithmic Trading ◽  
Market Quality ◽  
Market Uncertainty ◽  
Statistical Arbitrage ◽  
Technical And Fundamental Analysis ◽  
Future Events ◽  
The Impact

In this work we simulate algorithmic trading (AT) in asset markets to clarify its impact. Our markets consist of human and algorithmic counterparts of traders that trade based on technical and fundamental analysis, and statistical arbitrage strategies. Our specific contributions are: (1) directly analyze AT behavior to connect AT trading strategies to specific outcomes in the market; (2) measure the impact of AT on market quality; and (3) test the sensitivity of our findings to variations in market conditions and possible future events of interest. Examples of such variations and future events are the level of market uncertainty and the degree of algorithmic versus human trading. Our results show that liquidity increases initially as AT rises to about 10% share of the market; beyond this point, liquidity increases only marginally. Statistical arbitrage appears to lead to significant deviation from fundamentals. Our results can facilitate market oversight and provide hypotheses for future empirical work charting the path for developing countries where AT is still at a nascent stage.

Unregulated Algorithmic Trading: Testing the Boundaries of the European Union Algorithmic Trading Regime

2020 ◽  
Vol 6 (2) ◽  
pp. 270-305
Author(s):  
Clara Martins Pereira
Keyword(s):  
European Union ◽  
Equity Markets ◽  
Algorithmic Trading ◽  
Market Quality ◽  
Financial Instruments ◽  
The European Union ◽  
New Type ◽  
Definition Of ◽  
The Impact ◽  
Trading Regime

Abstract Trading in modern equity markets has come to be dominated by machines and algorithms. However, there is significant concern over the impact of algorithmic trading on market quality and a number of jurisdictions have moved to address the risks associated with this new type of trading. The European Union has been no exception to this trend. This article argues that while the European Union algorithmic trading regime is often perceived as a tough response to the challenges inherent in machine trading, it has one crucial shortcoming: it does not regulate the simpler, basic execution algorithms used in automated order routers. Yet the same risk generally associated with algorithmic trading activity also arises, in particular, from the use of these basic execution algorithms—as was made evident by the trading glitch that led to the fall of United States securities trader Knight Capital in 2012. Indeed, such risk could even be amplified by the lack of sophistication of these simpler execution algorithms. It is thus proposed that the European Union should amend the objective scope of its algorithmic trading regime by expanding the definition of algorithmic trading under the Markets in Financial Instruments Directive (MiFID II) to include all execution algorithms, regardless of their complexity.

Risk Attitude and Corporate Investment under Output Market Uncertainty: Evidence from The Mekong River Delta, Vietnam

2016 ◽  
pp. 59-70
Author(s):  
Ninh Le Khuong ◽  
Nghiem Le Tan ◽  
Tho Huynh Huu
Keyword(s):  
Negative Relationship ◽  
Risk Attitude ◽  
Business Strategies ◽  
Risk Averse ◽  
Market Uncertainty ◽  
Firm Investment ◽  
Output Market ◽  
The Impact ◽  
The Relationship

This paper aims to detect the impact of firm managers’ risk attitude on the relationship between the degree of output market uncertainty and firm investment. The findings show that there is a negative relationship between these two aspects for risk-averse managers while there is a positive relationship for risk-loving ones, since they have different utility functions. Based on the findings, this paper proposes recommendations for firm managers to take into account when making investment decisions and long-term business strategies as well.

scholarly journals The Role of Trading Frictions in Real Asset Markets

2011 ◽  
Vol 101 (4) ◽  
pp. 1106-1143 ◽  
Author(s):  
Alessandro Gavazza
Keyword(s):  
Empirical Analysis ◽  
Capacity Utilization ◽  
Asset Markets ◽  
Asset Market ◽  
Commercial Aircraft ◽  
Average Productivity ◽  
Thin Market ◽  
Asset Allocations ◽  
The Empirical Analysis

This paper investigates how trading frictions vary with the thickness of the asset market by examining patterns of asset allocations and prices in commercial aircraft markets. The empirical analysis indicates that assets with a thinner market are less liquid—i.e., more difficult to sell. Thus, firms hold on longer to them amid profitability shocks. Hence, when markets for assets are thin, firms' average productivity and capacity utilization are lower, and the dispersions of productivity and of capacity utilization are higher. In turn, prices of assets with a thin market are lower and have a higher dispersion. (JEL A12, L11, L93)

Algorithmic Trading Efficiency and its Impact on Market-Quality

2021 ◽  
Author(s):  
Ritesh Kumar Dubey ◽  
A. Sarath Babu ◽  
Rajneesh Ranjan Jha ◽  
Urvashi Varma
Keyword(s):  
Algorithmic Trading ◽  
Market Quality ◽  
Trading Efficiency

The Impact of Policy Uncertainty on Macro Variables – An SVAR-Based Empirical Analysis for EU Countries

2017 ◽  
Vol 68 (2) ◽  
Author(s):  
Dominik Kronen ◽  
Ansgar Belke
Keyword(s):  
Stock Market ◽  
Policy Uncertainty ◽  
Stock Market Volatility ◽  
Market Uncertainty ◽  
Vector Autoregressive ◽  
Svar Model ◽  
Negative Effect ◽  
Macro Variables ◽  
The Impact ◽  
Structural Vector

AbstractIn light of the rising political and economic uncertainty in Europe, we aim to provide a basic understanding of the impact of policy and stock market uncertainty on a set of macroeconomic variables such as production and investment. In this paper, we apply a structural vector autoregressive (SVAR) model to gain first insights that may help to identify avenues for further research. We find that stock market volatility shows a fairly consistently negative effect. However, the implications of policy uncertainty for Europe and the euro area in particular are not so straightforward.

scholarly journals Appraisal of the Fischer-DiPasquale-Wheaton (FDW) real estate model and development of an integrated property and asset market model

2004 ◽  
Vol 7 (2) ◽  
pp. 341-367 ◽  
Author(s):  
H Du Toit ◽  
CE Cloete
Keyword(s):  
Real Estate ◽  
South African ◽  
Stochastic Equations ◽  
Market Model ◽  
Asset Markets ◽  
Asset Market ◽  
Model Configuration ◽  
Property Markets ◽  
Micro Foundations

This paper provides a concise overview of the development of an integrated property and asset market model (IPAMM) for South African property markets, utilising the Pretoria office market as case study. The IPAMM simulates the interrelationships between property and asset markets in a diagrammatic quadrant model configuration. The Fischer-DiPasquale-Wheaton (FDW) real estate model, arguably the most advanced diagrammatic quadrant real estate model available at present, served as basis for the development of IPAMM. IPAMM is essentially a regression model based on a system of stochastic equations that captures the interrelationships between property and asset markets. The model advances beyond mere conceptualisation of these relationships to a quantified interpretation and application of the theoretical premises that represent the micro-foundations of economic behaviour in property and asset markets.

scholarly journals Consumption Responses to In-Kind Transfers: Evidence from the Introduction of the Food Stamp Program

2009 ◽  
Vol 1 (4) ◽  
pp. 109-139 ◽  
Author(s):  
Hilary W Hoynes ◽  
Diane Whitmore Schanzenbach
Keyword(s):  
Theoretical Model ◽  
Empirical Work ◽  
Food Stamps ◽  
Cash Income ◽  
Food Stamp Program ◽  
Difference In Difference ◽  
Food Expenditures ◽  
Theoretical Predictions ◽  
Difference Methods ◽  
The Impact

Economists have strong theoretical predictions about how in-kind transfers, such as providing vouchers for food, impact consumption. Despite the prominence of the theory, there is little empirical work on responses to in-kind transfers, and most existing work fails to support the canonical theoretical model. We employ difference-in-difference methods to estimate the impact of program introduction on food spending. Consistent with predictions, we find that food stamps reduce out-of-pocket food spending and increase overall food expenditures. We also find that households are inframarginal and respond similarly to one dollar in cash income and one dollar in food stamps. (JEL D12, H23, I38)

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