Graduation Year
2019
Date of Submission
4-2019
Document Type
Campus Only Senior Thesis
Degree Name
Bachelor of Arts
Department
Economics
Reader 1
Benjamin Gillen
Abstract
High Frequency Trading (HFTs) have dramatically changed the way markets operate through supplanting traditional market makers. Numerous studies and pundits have postulated a link between HFTs and market sell-off severity. Developed by Easley and O’Hara, the Volume Synchronized Probability of Informed Trading (VPIN) is a metric that uses volume imbalances to determine the probability of informed trading. This study finds that a time-based variation of VPIN can be useful in predicting market sell-offs as it has a positive relationship with forward semivariance and a negative relationship with forward returns under different market conditions.
Recommended Citation
Li, Jia Jian, "Are Algos Ruining Everything for Us? The Predictive Relationship between Informed Trading and Security Returns under Different Market Conditions" (2019). CMC Senior Theses. 2257.
https://scholarship.claremont.edu/cmc_theses/2257
This thesis is restricted to the Claremont Colleges current faculty, students, and staff.
