Algorithmic trading and block ownership initiation: An information perspective |
| |
| Affiliation: | 1. School of Accounting, Economics and Finance, Curtin Business School, 6102, Perth, WA, Australia;2. Deakin Business School, Deakin University, Geelong, Victoria, 3220, Australia;3. Fordham University, Bank of Finland, University of Sydney, 45 Columbus Ave, New York, NY 10023, USA;4. The University of Sydney Business School, University of Sydney, Sydney, NSW, 2006, Australia;1. Université Toulouse Capitole, TSM Research (UMR 5303 CNRS), France;2. Université Côte d’Azur, GRM (EA 4711), IAE Nice Graduate School of Management, France;3. Université de Tours, VALLOREM (EA 6296), IAE de Tours, France;1. The National University of Singapore, Singapore;2. The University of Queensland, Australia;1. University of Notre Dame Australia, Australia;2. University of Technology Sydney, Australia |
| |
| Abstract: | This paper examines the impact of algorithmic trading (AT) on investors' incentives to initiate block ownership in U.S. public companies. We find that a one standard deviation change in AT activity reduces the block ownership initiation likelihood by 3.5%. Using the SEC's randomised tick size pilot experiment in 2016 as a negative shock to AT, we show that the effect of AT on block ownership initiation is causal. Further evidence supports the information-hindering explanation that AT discourages sophisticated investors from acquiring information, which results in a decrease in block ownership initiation. We find that the effect of AT is more pronounced among information-sensitive investors and that institutional investors reduce their information-gathering activities in AT-targeted stocks. Additional tests exploring information-based trading behaviour in the presence of AT provide strong evidence to support the explanation of information-hindering, and our results hold across a battery of robustness tests. |
| |
| Keywords: | Blockholder Algorithmic trading Ownership composition Informed trading Information incentive G11 G14 G18 G30 |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
