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Does High-Frequency Trading Affect Stock Market Predictability?

Egesten, Gustav LU and Hasselström, David (2018) NEKN01 20181
Department of Economics
Abstract
In this paper, it is investigated whether High-Frequency Trading has an impact on the stock market predictability or not, using nine different Autoregressive moving average models forecasts are generated. Thenceforth, ordinary least squares are used to regress the variance of the forecasting errors with High-Frequency Trading as an explanatory variable in order to see if it has any form of impact. It was found that in four out of nine cases, High-Frequency trading had a significant impact on how adequately the stock market was predicted. Thus, the interpretation of the results is that High-Frequency Trading has a predictive ability and does affect the accuracy of forecasting.
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author
Egesten, Gustav LU and Hasselström, David
supervisor
organization
course
NEKN01 20181
year
type
H1 - Master's Degree (One Year)
subject
keywords
High-Frequency Trading, Predictability, Forecasting, ARMA, GARCH
language
English
id
8958580
date added to LUP
2018-09-26 10:45:18
date last changed
2018-09-26 10:45:18
@misc{8958580,
  abstract     = {{In this paper, it is investigated whether High-Frequency Trading has an impact on the stock market predictability or not, using nine different Autoregressive moving average models forecasts are generated. Thenceforth, ordinary least squares are used to regress the variance of the forecasting errors with High-Frequency Trading as an explanatory variable in order to see if it has any form of impact. It was found that in four out of nine cases, High-Frequency trading had a significant impact on how adequately the stock market was predicted. Thus, the interpretation of the results is that High-Frequency Trading has a predictive ability and does affect the accuracy of forecasting.}},
  author       = {{Egesten, Gustav and Hasselström, David}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Does High-Frequency Trading Affect Stock Market Predictability?}},
  year         = {{2018}},
}