HFT – Algorithmic Trading Shows Clear Intraday Periodicity

Algorithmic trading is supposed to optimize investment strategies, taking out the subjective influence of a trader making minute by minute decisions, and high frequency trading (HFT) is known to be lightning fast. But people’s preference for round numbers has a startling effect on trade volumes, clumping activity at regular intervals without a rational explanation.

“Recurring periodicity of crowded trading activity increases as the ‘roundness’ of time marks increases. One hour marks are the most attractive for clustered activity, followed by half-hour marks and then by 10-minute and finally, 5 minute marks. This preference of increasing roundness points to the human nature of the observed phenomenon,” write Rutgers School of Business professors John Broussard and Andrei Nikiforov in their recent paper...