Intraday periodicity in algorithmic trading

John Broussard and Andrei Nikiforov

Journal of International Financial Markets, Institutions and Money, 2014, vol. 30, issue C, 196-204

Abstract: This paper documents a stark periodicity in intraday volume and in the number of trades. We find activity in both variables spikes by about 20% at regular intervals of 5 or 10min throughout the trading day. We speculate this activity is either the result of algorithmic trading influenced by human traders/programmers’ behavioral bias to transact on round time marks, or the result of optimizing algorithms choosing to concentrate their trades in time to take advantage of lower costs. We find evidence supporting the former, not the latter. Measures of transaction costs show no significant change during these spikes. Amihud's measure of price impact also shows no discernable pattern. Additional research is needed to more carefully explain this recurring phenomenon.

Keywords: Algorthmic trading; Stock market patterns; Behavioral bias; Microstructure (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:30:y:2014:i:c:p:196-204

DOI: 10.1016/j.intfin.2014.03.001

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