The Leibniz Institute SAFE organizes a seminar on
The effect of algorithmic trading on pricing fat finger errors
Olga Balakina (SAFE)
Abstract: Automated trading has changed financial markets profoundly over the last two decades. This project proposes a novel identification strategy that examines market reaction to non- informative events over time in order to understand whether automated trading has improved market efficiency. We begin by estimating the impact that investor confusion between stocks with similar company tickers has on stock returns and trading volumes. The shocks to the stock price of the company with a similar name are non-informative and efficient markets should arbitrage them away. We proceed to examine whether the rise of automated trading is associated with quicker price discovery, and whether automated trading limits or amplifies the impact of investor mistakes on stock markets.
29 November, 12:00 - 13:00
