Defining α in high frequency trading is more complicated than in low frequency since not all strategies are based on price forecasts. More components are required, as is an understanding of the interactions between them. In this paper, we develop the α attribution model for high frequency...

This paper examines every NASDAQ ITCH feed message for the S&P 500 stocks for 2012 and identifies clusters of extremely high and extremely low limit order cancellation activity. We find results consistent with the ideas that cancel clusters are the result of high frequency traders jockeying for...

Purpose: This paper investigates the strategic behavior of algorithmic trading firms from an innovation economics perspective. We seek to uncover the sources of competitive advantage these firms develop to make markets inefficient for them and enable their survival.Methodology: First, we review...

This paper explains the capability theory of how HFT firms make allocation decisions under uncertainty, and shows how capability maximization is precisely consistent with utility theory. The issue, however, is how these firms actually make allocation decisions in practice. Using the Gioia...

Automated trading now dominates the financial markets. Yet, no philosophy of academic research into the topic exists. As the growth in automated trading suggests their greater returns and predictability, this paper examines stability and statistical control of trading process outputs as method...