Abstract
This study tests the hypothesis that high-frequency traders (HFTs) identify patterns that allow them to anticipate and trade ahead of other investors’ order flow. HFTs’ aggressive purchases and sales lead those of other investors. The effect is consistently stronger for a subset of HFTs and at times when non-HFTs are hypothesized to be less focused on disguising order flow. These results are not fully explained by HFTs reacting faster to signals that non-HFTs also observe such as news, contrarian or trend-chasing behavior by non-HFTs, and trader misclassification. These findings support the existence of an anticipatory trading channel through which HFTs may increase non-HFT trading costs.
Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
