Rise of the Machines: Algorithmic Trading in the Foreign Exchange Market

# Rise of the Machines: Algorithmic Trading in the Foreign Exchange Market > OpenAlex Metadata Hub · https://openalex.org/W2103467996 ## Bibliographic - **DOI:** 10.1111/jofi.12186 - **Year:** 2014 - **Citations:** 632 - **Open Access:** Yes (green) - **License:** — - **Source:** http://www.federalreserve.gov/pubs/ifdp/2009/980/ifdp980.pdf ## Authors - Alain Chaboud - Benjamin Chiquoine - Erik Hjalmarsson - Clara Vega ## Abstract ABSTRACT We study the impact of algorithmic trading (AT) in the foreign exchange market using a long time series of high‐frequency data that identify computer‐generated trading activity. We find that AT causes an improvement in two measures of price efficiency: the frequency of triangular arbitrage opportunities and the autocorrelation of high‐frequency returns. We show that the reduction in arbitrage opportunities is associated primarily with computers taking liquidity. This result is consistent with the view that AT improves informational efficiency by speeding up price discovery, but that it may also impose higher adverse selection costs on slower traders. In contrast, the reduction in the autocorrelation of returns owes more to the algorithmic provision of liquidity. We also find evidence consistent with the strategies of algorithmic traders being highly correlated. This correlation, however, does not appear to cause a degradation in market quality, at least not on average. ## Keywords Market liquidity, Arbitrage, Autocorrelation, Algorithmic trading, High-frequency trading, Foreign exchange market, Price discovery, Econometrics, Adverse selection, Flash trading, Foreign exchange, Reduction (mathematics), Quality (philosophy), Economics, Financial economics, Monetary economics, Dark liquidity, Microeconomics, Mathematics, Statistics ## Concepts - Market liquidity - Arbitrage - Autocorrelation - Algorithmic trading - High-frequency trading - Foreign exchange market - Price discovery - Econometrics - Adverse selection - Flash trading - Foreign exchange - Reduction (mathematics) - Quality (philosophy) - Economics - Financial economics - Monetary economics - Dark liquidity - Microeconomics - Mathematics - Statistics - Philosophy - Futures contract - Geometry - Epistemology --- *Metadata only — full text not imported unless Open Access license permits.*

Bài “Rise of the Machines: Algorithmic Trading in the Foreign Exchange Market” được TradingBase chuyển thành Knowledge Product cho trader — không phải trang đọc abstract OpenAlex. Tóm lược học thuật (đã diễn giải): ABSTRACT We study the impact of algorithmic trading (AT) in the foreign exchange market using a long time series of high‐frequency data that identify computer‐generated trading activity. We find that AT causes an improvement in two measures of price efficiency: the frequency of triangular arbitrage opportunities and the autocorrelation of high‐frequency returns. We show that the reduction in arbitrage opportunities is associated primarily with computers taking liquidity. This result is consistent with the view that AT improves informational efficiency by speeding up price discovery, but that it may also impose higher adverse selection costs on slower traders. In contrast, the reduction in the autocorrelation of returns owes more to the algorithmic provision of liquidity. We also find evidence consistent with the strategies of algorithmic traders being highly correlated. This correlation,… Phần Trading Insights bên dưới nối nghiên cứu với Forex, vàng, USD, lãi suất và risk regime — để bạn đưa vào journal và playbook. Metadata DOI/OA chỉ là rail tham chiếu; nội dung chính là summary, takeaways và ứng dụng thị trường do Content Factory sinh.