Does Algorithmic Trading Increase Volatility? Empirical Evidence from the Fully-Electronic Trading Platform Xetra
نویسنده
چکیده
Being equipped with a unique high-frequency dataset that enables us to precisely identify algorithmic trading (i.e. computergenerated) activity, we provide strong evidence that algorithmic trading does not exceedingly increases volatility, at least not more than human traders do. Our empirical analyses cover several potential reasons why algorithmic trading could increase volatility. For example, we address whether or not algorithmic traders follow less diverse trading strategies than humans. Moreover, we investigate whether or not algorithmic traders withdraw liquidity from the market during periods of high volatility.
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