Which of the following best describes the impact of high-frequency trading on market efficiency? A) Enhances efficiency in time space but not in volume space B) Improves efficiency... Which of the following best describes the impact of high-frequency trading on market efficiency? A) Enhances efficiency in time space but not in volume space B) Improves efficiency in all trading dimensions C) Reduces overall market activity D) Creates uniform pricing across market segments
Understand the Problem
The question is asking for an assessment of high-frequency trading's effect on market efficiency, requiring a nuanced understanding of financial markets and trading strategies.
Answer
Enhances efficiency in time space but not in volume space.
Enhances efficiency in time space but not in volume space.
Answer for screen readers
Enhances efficiency in time space but not in volume space.
More Information
High-frequency trading enhances market efficiency in time by facilitating faster transactions but can result in inefficient allocation in terms of volume, as trades may occur at incorrect prices.
Sources
- The High-Frequency Trading Arms Race: Frequent Batch Auctions - academic.oup.com
- High frequency trading: assessing the impact on market efficiency - assets.publishing.service.gov.uk
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