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High-Frequency Trading: How Money Flow Affects Stock Returns

Olaison, Eric (2010) NEKM01 20102
Department of Economics
Abstract (Swedish)
Purpose:
The main purpose with this thesis is to study tick-data in order to see if intra-day volume can predict short-term market movements.

Methodology:
This thesis a quantitative study, using a deductive method and with an exploratory research design.

Theoretical framework:
In the theoretical framework, important theories for this thesis are presented, such as tape reading, high-frequency trading, and previous findings about money flow and measures of floor trading.

Empirical foundations:
The data sample consists of approximately 2.2 million trades during January 1, 2005 to April 22, 2010. The data was retrieved from Six Telekurs database.

Conclusions:
The high-frequency measures used in this thesis showed a... (More)
Purpose:
The main purpose with this thesis is to study tick-data in order to see if intra-day volume can predict short-term market movements.

Methodology:
This thesis a quantitative study, using a deductive method and with an exploratory research design.

Theoretical framework:
In the theoretical framework, important theories for this thesis are presented, such as tape reading, high-frequency trading, and previous findings about money flow and measures of floor trading.

Empirical foundations:
The data sample consists of approximately 2.2 million trades during January 1, 2005 to April 22, 2010. The data was retrieved from Six Telekurs database.

Conclusions:
The high-frequency measures used in this thesis showed a significant relationship between the measures and the stock return at a 1% significance level. The accumulated money flow was highly positively correlated with the stock return until late 2008, and since then it became negatively correlated. Steadily increasing activity by high-frequency trading algorithms, as well as the tick-size changes that occurred during 2009, might be an explanation. The trading model, which used the three measures studied, had almost twice as high risk-adjusted return as the stock itself. (Less)
Please use this url to cite or link to this publication:
author
Olaison, Eric
supervisor
organization
course
NEKM01 20102
year
type
H1 - Master's Degree (One Year)
subject
keywords
money flow, intra-day volume., tape reading, High-frequency trading
language
English
id
1730776
date added to LUP
2010-12-02 10:13:09
date last changed
2010-12-02 10:13:09
@misc{1730776,
  abstract     = {Purpose:
The main purpose with this thesis is to study tick-data in order to see if intra-day volume can predict short-term market movements.

Methodology:	
This thesis a quantitative study, using a deductive method and with an exploratory research design.

Theoretical framework:
In the theoretical framework, important theories for this thesis are presented, such as tape reading, high-frequency trading, and previous findings about money flow and measures of floor trading.

Empirical foundations:
The data sample consists of approximately 2.2 million trades during January 1, 2005 to April 22, 2010. The data was retrieved from Six Telekurs database.

Conclusions:
The high-frequency measures used in this thesis showed a significant relationship between the measures and the stock return at a 1% significance level. The accumulated money flow was highly positively correlated with the stock return until late 2008, and since then it became negatively correlated. Steadily increasing activity by high-frequency trading algorithms, as well as the tick-size changes that occurred during 2009, might be an explanation. The trading model, which used the three measures studied, had almost twice as high risk-adjusted return as the stock itself.},
  author       = {Olaison, Eric},
  keyword      = {money flow,intra-day volume.,tape reading,High-frequency trading},
  language     = {eng},
  note         = {Student Paper},
  title        = {High-Frequency Trading: How Money Flow Affects Stock Returns},
  year         = {2010},
}