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Lookup NU author(s): Viktor Manahov,
Professor Robert Hudson
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This study investigates the implications of high-frequency trading (HFT) on market efficiency and price discovery by using state-space models and real-life one-minute high-frequency data of the six most traded currency pairs worldwide - USD/EUR, USD/JPY, USD/GBP, USD/AUD, USD/CHF and USD/CAD. We found significant evidence that HFT enhances market efficiency and has a beneficial role in price discovery by trading in the direction of the permanent component of the state-space model and in the opposite direction of its transitory component.
Author(s): Manahov V, Hudson R
Publication type: Article
Publication status: Published
Journal: Applied Economics Letters
Online publication date: 07/05/2014
ISSN (print): 1350-4851
ISSN (electronic): 1466-4291
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