Paper studies institutional traders' intraday predictive ability and liquidity provision
Get up to speed
Xinlei Hao, Jiajun Guo, Jussi Keppo, and Xianhua Peng have released a working paper analyzing the relationship between institutional traders' predictive ability, liquidity provision, and their intraday proprietary trading profitability, based on a high-frequency dataset from a securities exchange. The study finds that a hypothetical follow strategy constructed from the execution flow of traders with predictive ability achieves annualized Sharpe ratios of 16 to 63 across different trading frequencies. For each one-standard-deviation increase in predictive ability proxies, the realized profit and loss on matched positions increases by 1.02 to 1.19 currency units, and the higher the intensity of liquidity provision, the greater the corresponding increase in profit and loss.
AI-generated from reports · 1 hr agoUpdated
Coverage timeline
Follow the coverage to understand different sides of the event.
- arXiv q-finIntraday Predictive Ability and Liquidity Provision of Institutional Traders
A study based on high-frequency data from a securities exchange analyzes the relationship between institutional traders’ predictive ability, liquidity provision, and their intraday proprietary trading profits. The study finds that a hypothetical follow strategy constructed from the order flow of traders with predictive ability yields annualized Sharpe ratios of 16 to 63 across different trading frequencies. A one-standard-deviation increase in the predictive-ability proxy raises the realized profit and loss of matched positions by 1.02 to 1.19 currency units; the stronger the liquidity provision, the larger the corresponding increase in profit and loss.
Trend of this event
Not enough consecutive observations yet; trend is not drawn.