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    How high frequency trading affects a market index

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    License
    Attribution 4.0 International
    Date Issued
    2013-07-02
    Publisher Version
    10.1038/srep02110
    Author(s)
    Kenett, Dror Y.
    Ben-Jacob, Eshel
    Stanley, H. Eugene
    Gur-Gershgoren, Gitit
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    Permanent Link
    https://hdl.handle.net/2144/39957
    Version
    Published version
    Citation (published version)
    Dror Y. Kenett, Eshel Ben-Jacob, H. Eugene Stanley, Gitit Gur-Gershgoren. 2013. "How High Frequency Trading Affects a Market Index." SCIENTIFIC REPORTS, Volume 3. https://doi.org/10.1038/srep02110
    Abstract
    The relationship between a market index and its constituent stocks is complicated. While an index is a weighted average of its constituent stocks, when the investigated time scale is one day or longer the index has been found to have a stronger effect on the stocks than vice versa. We explore how this interaction changes in short time scales using high frequency data. Using a correlation-based analysis approach, we find that in short time scales stocks have a stronger influence on the index. These findings have implications for high frequency trading and suggest that the price of an index should be published on shorter time scales, as close as possible to those of the actual transaction time scale.
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    Attribution 4.0 International
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    • CAS: Physics: Scholarly Papers [414]
    • BU Open Access Articles [4757]


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