Economics, Econometrics and Finance
4 years ago

Algorithmic trading boosts market liquidity, narrowing spreads and reducing price discovery.

1 view
The Journal of Finance
Does Algorithmic Trading Improve Liquidity?
Terrence Hendershott, Charles M. Jones, Albert J. Menkveld

Paper Summary

Algorithmic trading has become more popular in recent years. A study looked at whether it helps make markets better. They used a change in how the New York Stock Exchange works to see if algorithmic trading affects liquidity. The results show that algorithmic trading makes it easier to buy and sell stocks by making prices more accurate and reducing the chance of making bad trades. This means that algorithmic trading can improve how well markets work.

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