High-frequency trading, stock volatility, and intraday crashes

Imen Ben Ammar and Slaheddine Hellara

The Quarterly Review of Economics and Finance, 2022, vol. 84, issue C, 337-344

Abstract: We examine the effect of high-frequency trading (HFT) on the price volatility of Euronext-listed stocks. Under stable market conditions, greater HFT intensity is associated with decreased stock price volatility. However, during periods of intraday crashes, rapid interactions between HFT algorithms lead to high rates of order cancellations and simultaneous withdrawals of high-frequency traders from the limit order book. High-frequency traders submit aggressive orders during these periods and consume more liquidity than they provide, resulting in increased stock price volatility.

Keywords: Algorithmic trading; High-frequency trading; Market microstructure; Stock volatility; Intraday crashes (search for similar items in EconPapers)
JEL-codes: G12 G14 G19 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:84:y:2022:i:c:p:337-344

DOI: 10.1016/j.qref.2022.03.004

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