Resource title

Feedback trading

Resource image

image for OpenScout resource :: Feedback trading

Resource description

Order flow has been found to carry information to the market. When assessing how informative order flow is, the VAR methodology is typically employed, using impulse response functions. However, in such analyses, the direction of causality runs explicitly from order flow to asset return. If data are sampled at anything other than at the highest frequencies then any feedback trading may well appear contemporaneous; trading in period t depends on the asset return in that interval. The implications of contemporaneous feedback trading are examined in the spot USD/EUR currency market and we find that when data are sampled at the one and five minute frequency, such trading strategies cause the price impact of order flow to be significantly larger than when feedback trading is ruled out.

Resource author

Resource publisher

Resource publish date

Resource language


Resource content type


Resource resource URL

Resource license