High frequency trading and market quality : an analysis on Dow Jones industrial average and its component stocks
This paper examines the market quality in the US securities market surrounding the “Flash Crash” on May 6, 2010 by focusing on the Dow Jones Industrial Average (DJIA) and its component stocks. The study defines market quality in three dimensions: stock price’s volatility, trading activity, and liqui...
| Main Authors: | , , |
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| Other Authors: | |
| Format: | Final Year Project (FYP) |
| Language: | English |
| Published: |
2013
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| Subjects: | |
| Online Access: | http://hdl.handle.net/10356/51587 |
| _version_ | 1826110841210011648 |
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| author | Yap, Jia Wei Du, Jing Zhang, Shu Qi |
| author2 | Charlie Charoenwong |
| author_facet | Charlie Charoenwong Yap, Jia Wei Du, Jing Zhang, Shu Qi |
| author_sort | Yap, Jia Wei |
| collection | NTU |
| description | This paper examines the market quality in the US securities market surrounding the “Flash Crash” on May 6, 2010 by focusing on the Dow Jones Industrial Average (DJIA) and its component stocks. The study defines market quality in three dimensions: stock price’s volatility, trading activity, and liquidity. The data collected is analyzed at the per-second level during the regular trading hours across the stock exchanges. Test results show that the market was efficient after the “Flash Crash”, and that High Frequency Trading (HFT) facilitates price discovery. Trading volume, number of trades, and stock price’s volatility increased during the event, but subsequently decreased back to normal over the post 5-day period. Likewise, May 6 recorded the largest decrease in liquidity and trade size, but it gradually returned to normal. A more detailed analysis indicates a lead-lag relationship between the 30 component stocks and the DJIA Exchange Traded Fund (ETF). Together with the autocorrelation analysis conducted, the study concludes that the securities market is efficient in processing new information. |
| first_indexed | 2024-10-01T02:40:46Z |
| format | Final Year Project (FYP) |
| id | ntu-10356/51587 |
| institution | Nanyang Technological University |
| language | English |
| last_indexed | 2024-10-01T02:40:46Z |
| publishDate | 2013 |
| record_format | dspace |
| spelling | ntu-10356/515872023-05-19T03:30:04Z High frequency trading and market quality : an analysis on Dow Jones industrial average and its component stocks Yap, Jia Wei Du, Jing Zhang, Shu Qi Charlie Charoenwong Nanyang Business School DRNTU::Business This paper examines the market quality in the US securities market surrounding the “Flash Crash” on May 6, 2010 by focusing on the Dow Jones Industrial Average (DJIA) and its component stocks. The study defines market quality in three dimensions: stock price’s volatility, trading activity, and liquidity. The data collected is analyzed at the per-second level during the regular trading hours across the stock exchanges. Test results show that the market was efficient after the “Flash Crash”, and that High Frequency Trading (HFT) facilitates price discovery. Trading volume, number of trades, and stock price’s volatility increased during the event, but subsequently decreased back to normal over the post 5-day period. Likewise, May 6 recorded the largest decrease in liquidity and trade size, but it gradually returned to normal. A more detailed analysis indicates a lead-lag relationship between the 30 component stocks and the DJIA Exchange Traded Fund (ETF). Together with the autocorrelation analysis conducted, the study concludes that the securities market is efficient in processing new information. BUSINESS 2013-04-05T06:52:31Z 2013-04-05T06:52:31Z 2013 2013 Final Year Project (FYP) http://hdl.handle.net/10356/51587 en Nanyang Technological University 81 p. application/pdf |
| spellingShingle | DRNTU::Business Yap, Jia Wei Du, Jing Zhang, Shu Qi High frequency trading and market quality : an analysis on Dow Jones industrial average and its component stocks |
| title | High frequency trading and market quality : an analysis on Dow Jones industrial average and its component stocks |
| title_full | High frequency trading and market quality : an analysis on Dow Jones industrial average and its component stocks |
| title_fullStr | High frequency trading and market quality : an analysis on Dow Jones industrial average and its component stocks |
| title_full_unstemmed | High frequency trading and market quality : an analysis on Dow Jones industrial average and its component stocks |
| title_short | High frequency trading and market quality : an analysis on Dow Jones industrial average and its component stocks |
| title_sort | high frequency trading and market quality an analysis on dow jones industrial average and its component stocks |
| topic | DRNTU::Business |
| url | http://hdl.handle.net/10356/51587 |
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