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High‐Frequency Positive Feedback Trading and Market Quality: Evidence from China's Stock Market
Author(s) -
Wan Die,
Yang Xiaoguang
Publication year - 2017
Publication title -
international review of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.489
H-Index - 18
eISSN - 1468-2443
pISSN - 1369-412X
DOI - 10.1111/irfi.12116
Subject(s) - positive feedback , database transaction , market microstructure , high frequency trading , quality (philosophy) , china , transaction data , business , stock market , stock (firearms) , monetary economics , trading strategy , price discovery , transaction cost , economics , econometrics , algorithmic trading , microeconomics , financial economics , order (exchange) , finance , computer science , philosophy , law , futures contract , horse , engineering , biology , paleontology , epistemology , political science , programming language , mechanical engineering , electrical engineering
This paper managed to measure the positive feedback trading intensity and its asymmetry with high‐frequency transaction data of China's individual stocks. The intraday positive feedback trading is found to be heterogeneous, and buying‐winners effect is significantly stronger than selling‐losers effect. In general, the high‐frequency asymmetric positive feedback trading's impact on market quality is mixed: The intraday positive feedback trades contribute to a liquid and active‐trading market but at the same time slow down the price discovery process and reduce the price efficiency.