An expert on high-frequency stock market trading will deliver the Spring Lecture of the UC Santa Cruz Center for Analytical Finance (CAFIN) on Wednesday, May 28, from 3:30-5 p.m. in the Simularium, E2 Building on the UCSC campus. The lecture is free and open to the public.
Professor Terrence Hendershott of the Haas School of Business at UC Berkeley will speak on “High Frequency Trading and the 2008 Short Sale Ban.” High-frequency trading and efforts to understand its consequences were recently the subject of the book Flash Boys.
In the research on which his talk is based, Hendershott and collaborators examine the effects of high-frequency traders (HFTs) on liquidity and price efficiency using the September 2008 short sale ban as an example.
Prominent academic
Hendershott is among the most prominent academics working on high-frequency trading. He holds the Cheryl and Christian Valentine Chair as an associate professor at the Haas School of business. He completed his Ph.D. at the Graduate School of Business at Stanford University. His current research interests include information technology’s impact and role in financial markets, the structure and regulation of financial markets, and the interaction between trading and asset price dynamics.
His writing has appeared in the Financial Times and Wall Street Journal and his research has been written about in the New York Times, Wall Street Journal, and other national newspapers and magazines. His academic work has been published in the most prestigious finance and economic journals. He edited Elsevier’s Handbook of Economics and Information Systems. He has received a National Science Foundation CAREER award for his research on electronic trading in financial markets.
Hendershott was the visiting economist at the New York Stock Exchange in 2006 to 2007 and was a member of the Nasdaq Economic Advisory Board from 2004 to 2007 and chair in 2007. He has consulted for various financial markets and investment firms.
CAFIN is a new research center at UC Santa Cruz, dedicated to exploring the challenge of improving financial intermediation in an interconnected, volatile world. Specific focus areas are market design, systemic risk and financial access.
Inaugural workshop
In April, CAFIN organized an inaugural workshop supported by the Dean of Social Sciences at UCSC, the UCSC Foundation Board and UCSC alumnus Stephen Bruce. Presenters from around the world attended the workshop, including Hong Kong, India, Turkey and Canada. Speakers included academics as well as researchers from institutions such as the International Monetary Fund, the Federal Reserve Bank of San Francisco, and the Central Securities Depository of Turkey.
Within CAFIN, steering committee member Professor Eric Aldrich of Economics has been working with Professor Gregory Laughlin, chair of the Astronomy and Astrophysics Department, to devise fundamental new techniques for understanding the patterns of financial trading at high speeds. Their core insight is that the pattern of trading can be understood better by using trades as measures of time (“trade time”), rather than conventional “clock time.”
Their ongoing work, which will soon be available as an inaugural CAFIN working paper, investigates the behavior of asset returns both during and outside of pre-scheduled news announcement periods. They develop a statistical model that characterizes the distributions of returns at fine time scales, outside of news announcements. This has immediate implications for broad topics such as market volatility, derivatives pricing, and potential for market failure.
