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Björn HagströmerProfessor

Om mig

Björn Hagströmer är professor i finansiering och studierektor för forskarutbildningen på Stockholm Business School (SBS). Han disputerade vid Aston Business School (i Birmingham) 2010 och har sedan dess varit anställd på SBS. 

Undervisning

Björn är kursansvarig för Financial Market Structure (FMS). Han är också doktorandhandledare för Chengcheng Qu och Alexander Hübbert.

Forskning

Björns forskningsintresse ligger inom finansiella marknaders mikrostruktur och prissättning. Ett urval av pågående arbeten anges nedan.

Determinants of Limit Order Cancellations
Medförfattare: Petter Dahlström och Lars Nordén. https://ssrn.com/abstract=3012831 

Mid-Day Call Auctions
Medförfattare: Jonathan Brogaard och Caihong Xu. https://ssrn.com/abstract=3868037  

 

Forskningsprojekt

Publikationer

I urval från Stockholms universitets publikationsdatabas

  • Do volatility extensions improve the quality of closing call auctions?

    2021. Ester Félez-Viñas, Björn Hagströmer. The Financial Review 56 (3), 385-406

    Artikel

    To improve the efficiency of the closing price, many equity exchanges apply volatility extensions to their closing call auctions (CCAs). If an imminent auction execution implies a large price change, the order submission period is extended to let traders reconsider their orders. This paper uses the introduction of closing auction volatility extensions at NASDAQ Nordic to provide the first analysis of the effects of such mechanisms. We find that the volatility extensions reduce transitory volatility and deter price manipulation at the close. Consistent with increased trust in the mechanism, the CCA attracts higher volumes after the change.

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  • Bias in the Effective Bid-Ask Spread

    2021. Björn Hagströmer. Journal of Financial Economics 142 (1), 314-337

    Artikel

    The effective bid-ask spread measured relative to the spread midpoint overstates the trueeffective bid-ask spread in markets with discrete prices and elastic liquidity demand. Theaverage bias is 13%–18% for S&P 500 stocks in general, depending on the estimator usedas benchmark, and up to 97% for low-priced stocks. Cross-sectional bias variation acrossstocks, trading venues, and investor groups can influence research inference. The use of themidpoint also undermines liquidity timing and trading performance evaluations, and canlead non-sophisticated investors to overpay for liquidity. To overcome these problems, thepaper proposes new estimators of the effective bid-ask spread.

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  • Information Revelation in Decentralized Markets

    2019. Björn Hagströmer, Albert J. Menkveld. Journal of Finance

    Artikel

    How does information get revealed in decentralized markets? We test several hypotheses inspired by recent dealer-network theory. To do so we construct an empirical map of information revelation where two dealers are connected based on the synchronicity of their quote changes. The tests, based on EUR/CHF quote data including the 2015 crash, largely support theory: Strongly connected (i.e., central) dealers are more informed. Connections are weaker when there is less to be learned. The crash serves to identify how a network forms when dealers are transitioned from no-learning to learning, that is, from a fixed to a floating rate.

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  • Risk and Return in High-Frequency Trading

    2018. Matthew Baron (et al.). Journal of financial and quantitative analysis

    Artikel

    We study performance and competition among high-frequency traders (HFTs). We construct measures of latency and find that differences in relative latency account for large differences in HFTs’ trading performance. HFTs that improve their latency rank due to colocation upgrades see improved trading performance. The stronger performance associated with speed comes through both the short-lived information channel and the risk management channel, and speed is useful for various strategies including market making and cross-market arbitrage. We find empirical support for many predictions regarding relative latency competition.

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  • Components of the Bid-Ask Spread and Variance

    2016. Björn Hagströmer, Richard Henricsson, Lars L. Nordén. Journal of futures markets 36 (6), 545-563

    Artikel

    We develop a structural model for the price formation and liquidity supply of an asset. Ourmodel facilitates decompositions of both the bid–ask spread and the return variance intocomponents related to adverse selection, inventory, and order processing costs. Furthermore,the model shows how the fragmentation of trading volume across trading venues influencesinventory pressure and price discovery. We use the model to analyze intraday price formationfor gold futures traded at the Shanghai Futures Exchange. We find that order processing costsexplain about 50% of the futures bid–ask spread, whereas the remaining 50% is equally due toasymmetric information and to inventory costs. About a third of the variance in futures returnsis attributable to microstructure noise. Trading at the spot market has a significant influence onfutures price discovery, but only a limited impact on the futures bid–ask spread.

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  • Trading Fast and Slow

    2015. Jonathan Brogaard (et al.). The Review of financial studies 28 (12), 3407-3443

    Artikel

    We exploit an optional colocation upgrade at NASDAQ OMX Stockholm to assess how speed affects market liquidity. Liquidity improves for the overall market and even for noncolocated trading entities. We find that the upgrade is pursued mainly by participants who engage in market making. Those that upgrade use their enhanced speed to reduce their exposure to adverse selection and to relax their inventory constraints. In particular, the upgraded trading entities remain competitive at the best bid and offer even when their inventories are in their top decile. Our results suggest that increasing the speed of market making participants benefits market liquidity.

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  • Closing Call Auctions at the Index Futures Market

    2014. Björn Hagströmer, Lars Nordén. Journal of futures markets 34 (4), 299-319

    Artikel

    We investigate the effects from the introduction of a closing call auction (CCA) at the index futures market. Limit order book models, where trader patience determines trading strategies, predict that a CCA increases trader patience and, hence, improves closing price accuracy and end‐of‐day liquidity. We find that the introduction leads to increased trader patience, improved futures closing price accuracy, unaffected tightness and resiliency, and decreased depth. Decreased depth is likely due to less order fishing activity. With the CCA, opportunistic patient traders’ posting of limit orders deep in the order book, to profit from impatient traders, is no longer feasible.

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  • How aggressive are high-frequency traders?

    2014. Björn Hagströmer, Lars Nordén, Dong Zhang. The Financial Review 49 (2), 395-419

    Artikel

    We study order aggressiveness of market-making high-frequency traders (MM-HFTs), opportunistic HFTs (Opp-HFTs), and non-HFTs. We find that MM-HFTs follow their own group's previous order submissions more than they follow other traders’ orders. Opp-HFTs and non-HFTs tend to split market orders into small portions submitted in sequence. HFTs submit more (less) aggressive orders when the same-side (opposite-side) depth is large, and supply liquidity when the bid–ask spread is wide. Thus, HFTs adhere strongly to the tradeoff between waiting cost and the cost of immediate execution. Non-HFTs care less about this tradeoff, but react somewhat stronger than HFTs to volatility.

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  • The Components of the Illiquidity Premium: An Empirical Analysis of U.S. Stocks 1927-2010

    2013. Björn Hagströmer, Björn Hansson, Birger Nilsson. Journal of Banking & Finance 37 (11), 4476-4487

    Artikel

    This paper implements a conditional version of the liquidity adjusted CAPM (LCAPM). The conditional LCAPM allows for a time-varying decomposition of the total illiquidity premium into a level component and three risk components. The estimated average annual total illiquidity premium for US stocks 1927–2010 is 1.74–2.08%, which is substantially lower than in most previous studies. The contributions from illiquidity level and illiquidity risk are 1.25–1.28% and 0.46–0.83%, respectively. Of the three illiquidity risk components, risk related to the hedging of wealth shocks is the most important, while commonality risk is the least important. The illiquidity premia are clearly time-varying, with peaks in downturns and crises, but with no general tendency to decrease over time. The level premium and the risk premium are significantly positively correlated, at around 0.35; indicating that in periods of turbulence both illiquidity cost and illiquidity risk premia tend to be high.

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  • The diversity of high-frequency traders

    2013. Björn Hagströmer, Lars Nordén. Journal of financial markets 16 (4), 741-770

    Artikel

    The regulatory debate concerning high-frequency trading (HFT) emphasizes the importance of distinguishing different HFT strategies and their influence on market quality. Using data from NASDAQ-OMX Stockholm, we compare market-making HFTs to opportunistic HFTs. We find that market makers constitute the lion's share of HFT trading volume (63–72%) and limit order traffic (81–86%). Furthermore, market makers have higher order-to-trade ratios and lower latency than opportunistic HFTs. In a natural experiment based on tick size changes, we find that the activity of market-making HFTs mitigates intraday price volatility.

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