Abstract
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.
Recommended Citation
Groth, Sven S., "Does Algorithmic Trading Increase Volatility? Empirical Evidence from the Fully-Electronic Trading Platform Xetra" (2011). Wirtschaftsinformatik Proceedings 2011. 112.
https://aisel.aisnet.org/wi2011/112