Role of Algorithmic and Co-Location Trading on the Speed of Information Adjustments: Evidence from India

Mohammad Shameem Jawed and Prasenjit Chakrabarti

Emerging Markets Finance and Trade, 2018, vol. 54, issue 9, 2021-2039

Abstract: We investigate whether increased Algorithmic Trading (AT) intensity caused by the introduction of Co-location trading (CLT) facilities improve the productive efficiency of the Indian stock indices. We measure the change in the speed of information adjustment and change of persistence before and after the introduction of CLT for Indian Indices. We report an improvement in the overall productive efficiency of the leading Indian Indices, Midcap and Smallcap indices being the prominent beneficiaries. Our work contributes to the empirical literature on the ongoing debate on the benefits of AT and its role in improving market efficiency, especially in the emerging markets context.

Date: 2018
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DOI: 10.1080/1540496X.2017.1342243

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