Pdf the effect of algorithmic trading on firm value


This article needs to be updated. They were developed so that traders do not need to pdff watch a stock and repeatedly send those slices out manually. An algorithm is a specific set of clearly defined instructions aimed to carry out a task or process.Algorithmic trading (automated trading, black-box trading, or simply algo-trading) is the process of using computers programmed to follow a defined set of instructions for placing a trade in order to generate profits at a speed and frequency that is impossible for a human trader.

The defined sets of rules are based on timing, price, quantity or any mathematical model. Excellent interface. Egfect support - shoutout to Alex:) Only problem is that the risk exposure (i.e. effecf purchaseable option) is not forthcoming. It was a painful process to set up AbstractMotivated by recent evidence that algorithmic trading impacts market quality, we examine the effect of algorithmic trading on firm value.

Using an algorithmic trading proxy based on electronic message traffic, we find a positive relation between algorithmic trading and firm value. The relation is stronger for firms with lower stock liquidity, higher idiosyncratic volatility, higher analyst coverage, and greater information asymmetry, which suggest that the value increases occur through market quality channels. The results are robust to various model specifications, and reverse causality and endogeneity concerns.

The results imply net benefits of algorithmic trading to firms.Suggested Citation: Suggested CitationJohnson, Shane A. and Zhang, Jun, The Effect of Algorithmic Trading on Firm Value (April 3, 2014). Available at SSRN: or.




Pdf the effect of algorithmic trading on firm value

Pdf the effect of algorithmic trading on firm value