Has Programmed Trading Made Stock Prices More Volatile?
نویسنده
چکیده
The presumed source of the volatility is a trading strategy called “programmed trading.”2 This strategy, which essentially involves trading on small and shortlived price differences for the same group of stocks in the spot, futures and options markets, is not new. The introduction of stock jnde~futures around 1982 and the application of computer techniques to monitor price differences and trigger trades between markets, however, are novel. These two innovations have reduced the cost of transacting among the markets, which has resulted in increased trading activity. The increased activity, the size of the trades made by individual players and the behavior of stock prices on days when stock index futures and options contracts
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