The DOI matches its Crossref record; 52 of the 52 references it cites were found in a registry or an index.
Does Algorithmic Trading Reduce Information Acquisition?
Abstract
I demonstrate an important tension between acquiring information and incorporating it into asset prices. As a salient case, I analyze algorithmic trading (AT), which is typically associated with improved price efficiency. Using a new measure of the information content of prices and a comprehensive panel of 54,879 stock-quarters of Securities and Exchange Commission (SEC) market data, I establish instead that the amount of information in prices decreases by 9% to 13% per standard deviation of AT activity and up to a month before scheduled disclosures. AT thus may reduce price informativeness despite its importance for translating available information into prices. Received May 21, 2016; editorial decision October 25, 2017 by Editor Itay Goldstein. Authors have furnished an Internet Appendix, which is available on the Oxford University PressWeb site next to the link to the final published paper online.
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Cites
The Cross‐Section of Expected Stock Returns
FAMA, E. F., & FRENCH, K. R. (1992) · The Journal of Finance · doi:10.1111/j.1540-6261.1992.tb04398.x · Cited by 17,261
EFFICIENT CAPITAL MARKETS: A REVIEW OF THEORY AND EMPIRICAL WORK*
Malkiel, B. G., & Fama, E. F. (1970) · The Journal of Finance · doi:10.1111/j.1540-6261.1970.tb00518.x · Cited by 15,699
Efficient capital markets: A review of theory and empirical work
Fama, E. F. (1970) · The Journal of Finance · doi:10.2307/2325486 · Cited by 13,635
ON THE PRICING OF CORPORATE DEBT: THE RISK STRUCTURE OF INTEREST RATES*
Merton, R. C. (1974) · The Journal of Finance · doi:10.1111/j.1540-6261.1974.tb03058.x · Cited by 10,581
Continuous Auctions and Insider Trading
Kyle, A. S. (1985) · Econometrica · doi:10.2307/1913210 · Cited by 9,580
An Empirical Evaluation of Accounting Income Numbers
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On the impossibility of informationally efficient markets
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The Adjustment of Stock Prices to New Information
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Robust Inference With Multiway Clustering
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Cited by
Algorithmic Trading and Market Quality: International Evidence
Boehmer, E., Fong, K., & Wu, J. (. (2021) · Journal of Financial and Quantitative Analysis · doi:10.1017/s0022109020000782 · Cited by 322
Metadata
- Authors
- Weller, B. M.
- Venue
- The Review of Financial Studies
- Publisher
- Oxford University Press (OUP)
- Published
- 2017-12-07
- Volume
- 31
- Issue
- 6
- Pages
- 2184-2226
- ISSN
- 0893-9454 (ISSN-L)
- 1465-7368
- OpenAlex
- W3121315550
- Cited by
- 268
- References
- 52
- FWCI
- 29.76
- Type
- journal article
- Language
- en
- Open access
- closed
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