Information and inventories in high-frequency trading

Johannes Muhle-Karbe, Kevin Webster

We study how short-term informational advantages can be monetized in a high-frequency setting, when large inventories are explicitly penalized. We find that if most of the additional information is revealed regardless of the high-frequency traders' actions, then fast inventory management allows to minimize positions with only second-order losses to expected returns. This is no longer possible if most of the additional information is only revealed through trades

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Year of publication:	2015
Authors:	Muhle-Karbe, Johannes ; Webster, Kevin
Publisher:	Geneva : Swiss Finance Institute
Subject:	high frequency trading \| information asymmetry \| inventory management \| Elektronisches Handelssystem \| Electronic trading \| Asymmetrische Information \| Asymmetric information \| Lagermanagement \| Warehouse management \| Wertpapierhandel \| Securities trading \| Marktmikrostruktur \| Market microstructure \| Börsenkurs \| Share price \| Volatilität \| Volatility \| Bestandsmanagement \| Inventory management \| Lagerhaltungsmodell \| Inventory model

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Extent:	1 Online-Ressource (16 Seiten)
Series:	Research paper series / Swiss Finance Institute. - Geneva, ZDB-ID 2392286-2. - Vol. no. 15-35 Swiss Finance Institute Research Paper ; No. 15-35
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Arbeitspapier ; Working Paper ; Graue Literatur ; Non-commercial literature
Language:	English
Other identifiers:	10.2139/ssrn.2654277 [DOI]
Classification:	G14 - Information and Market Efficiency; Event Studies ; G11 - Portfolio Choice ; C61 - Optimization Techniques; Programming Models; Dynamic Analysis ; C68 - Computable General Equilibrium Models
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10011412266