| Summary: | 碩士 === 國立臺灣師範大學 === 管理研究所 === 104 === This research employs intraday high frequency data on TAIEX futures. In our study, we define a trade with a holding period below 10 seconds as a very-short-term trade. We compare the order imbalance which excludes very-short-term trades and the order imbalance of the whole market, to find out how these very-short-term trades affect the market liquidity. Furthermore, we observe the intraday pattern of these trades and use regression models to analyze the influence of liquidity provided by these trades on market volatility.
Our empirical results reveal that very-short-term trades significantly provide liquidity in the Taiwan futures market. On the other hand, we show that the liquidity provided by these trades has an intraday U-shaped pattern and it is positively associated with intraday realized volatility. In addition, our results indicate that investors prefer entering the market to executing very-short-term trades for earning the spread when the market volatility is high. These trades enhance the liquidity of the futures market, playing the role of the liquidity supplier and reducing market volatility. Besides, we also find that if the market volatility decreases, these very-short-term trades will provide more liquidity in the later period.
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