Markets are bursting at their seams with financial data. Much of the data that researchers are now mining is called Level I, II, and III data; this data comprises information on orders, executions and cancellations across different price levels. Until recently, such data was scarce. Today, it is more accessible, but still little understood. The not-for-profit Big Data Finance 2015 conference taking place at NYU Courant on March 6, 2015, will present selected techniques and results of big data analytics applied to Finance. This article briefly explores a data phenomenon. The relationship between returns and order placement and cancellations is examined and the following findingsRead More →

By Irene Aldridge The latest turmoil observed in the European and U.S. markets may be symptomatic of a broader problem: changing behavior in financial securities. Historically, prices of unrelated securities used to rise and fall independently of each other and without great influence from the broader markets. Recent studies show that when markets rise, individual stocks still behave differently: some rise and some fall. Yet, when today’s markets fall, most stocks tend to fall in unison, amplifying negative performance of individual equities. The shifting risk-return characteristics of financial markets may influence the outcomes of investing styles, and change the way people look at markets forRead More →

High-frequency trading (HFT) uses quantitative investment computer programs to hold short-term positions in equities, options, futures, ETFs, currencies, and all other financial instruments that possess electronic trading capability. (Some securities, like Credit Default Swaps, for example, cannot be traded electronically, and are incompatible with investment algorithms.) Aiming to capture just a fraction of a penny per share or currency unit on every trade, high-frequency traders move in and out of such short-term positions several times each day. Fractions of a penny accumulate fast to produce significantly positive results at the end of every day. “High-frequency trading” became a buzzword in 2009, when Goldman Sachs accusedRead More →