Microeconomics: Search; Learning; Information Costs & Specific Knowledge; Expectation & Speculation eJournal  ·  2011  ·  Impact 4

ABSTRACT
This paper shows that high frequency trading may play a dysfunctional role in financial markets. Contrary to arbitrageurs who make financial markets more efficient by taking advantage of and thereby eliminating mispricings, high frequency traders can create a mispricing that they unknowingly exploit to the disadvantage of ordinary investors. This mispricing is generated by the collective and independent actions of high frequency traders, coordinated via the observation of a common signal.

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impact factor4
year_of_publication2011
sourceMicroeconomics: Search; Learning; Information Costs & Specific Knowledge; Expectation & Speculation eJournal

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