Business and Economic Horizons
| Previous Article | Back to Volume | Next Article | |
| Abstract | References | Citation | Download | Preview | Statistics | |
| Volume | 13 |
| Issue | 1 |
| Online publication date | 2017-02-23 |
| Title | Threshold convergence between the federal fund rate and South African equity returns around the colocation period |
| Author | Andrew Phiri |
| Abstract | Using weekly data collected from 20.09.2008 to 09.12.2016, this paper uses dynamic threshold adjustment models to demonstrate how the introduction of high-frequency and algorithmic trading on the Johannesburg Stock Exchange (JSE) has altered convergence relations between the federal fund rate and equity returns for aggregate and disaggregate South African market indices. We particularly find that for the post-crisis period, the JSE appears to operate more efficiently, in the weak-form sense, under high frequency trading platforms. |
| Citation | |
| References | Benos, E., Sagade, S. (2012). High-frequency trading behaviour and its impact on market quality: Evidence from the UK equity market. (Bank of England Working Paper Series, Working Paper No. 469). Burke, S., Hunter, J. (2005). Modelling non-stationary economic time series: A multivariate approach. Palgrave, Basingstoke. Carrion, A. (2013). Very fast money: High frequency trading on NASDAQ. Journal of Financial Markets, 16, 637-645. http://dx.doi.org/10.1016/j.finmar.2013.06.005 Enders, W., Silkos P. (2001). Cointegration and threshold adjustment. Journal of Business and Economic Statistics, 19(2), 166-176. http://dx.doi.org/10.1198/073500101316970395 Engle, R., Granger, C. (1987). Co-integration and error correction: Representation, estimation, and testing. Economertrica, 55, 369-384. http://www.jstor.org/stable/1913236 Hansbrouck, J., Saar, G. (2013). Low-latency trading. Journal of Financial Markets, 16, 741-770. http://dx.doi.org/10.1016/j.finmar.2013.05.003 Hansen, B. (2000). Sample splitting and threshold estimation. Econometrica, 68, 575-603. 10.1111/1468-0262.00124 Lee, E. (2015). High frequency trading in the Korean index futures market. Journal of Futures Market, 35, 31-51. 10.1002/fut.21640 Manahov, V., Hudson, R. (2014). The implications of high-frequency trading on market efficiency and price discovery. Applied Economics Letters, 21(16), 1148-1151. http://dx.doi.org/10.1080/13504851.2014.914135 Manahov, V., Hudson, R., Gebka, B. (2014). Does high frequency trading affect technical analysis and market efficiency? And if so, how? Journal of International Financial Markets, Institutions and Money, 28, 131-157. http://dx.doi.org/10.1016/j.intfin.2013.11.002 Phiri, A. (2016). Long-run equilibrium adjustment between inflation and stock market returns in South Africa: A nonlinear perspective. International Journal of Sustainable Economy, 9(1), 19-33. http://dx.doi.org/10.1504/IJSE.2017.080866 Riordan, R., Storkenmaier, A. (2012). Latency, liquidity, and price discovery. Journal of Financial Studies, 43, 767-797. http://dx.doi.org/10.1016/j.finmar.2012.05.003 Viljoen, T., Westerholm, J., Zheng, H. (2014). Algorithmic trading, liquidity and price discovery: An intraday analysis of the SPI 200 futures. The Financial Review, 49(2), 245-270. 10.1111/fire.12034 Virgilio, G. (2016). The impact of high-frequency trading on marketing volatility. The Journal of Trading, 11(2), 55-63. 10.3905/jot.2016.11.2.055 Zhang, F. (2010). The effect of high-frequency trading on stock volatility and price discovery. Retrieved on March 25, 2017, http://ssrn.com/abstract=1691679. |
| Keywords | Colocation, high frequency trading, global financial crisis, federal fund rates, equity returns, threshold cointegration, johannesburg stock exchange (JSE) |
| DOI | http://dx.doi.org/10.15208/beh.2017.01 |
| Pages | 1-9 |
| Download Full PDF | Download |
| Previous Article | Back to Volume | Next Article |
| Share |