The CAPM and the High Frequency Trading: Will the CAPM hold good under the impact of high-frequency trading?

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Issue Date
2011-08-31Author
Ki, YoungHa
Publisher
University of Kansas
Format
27 pages
Type
Thesis
Degree Level
M.A.
Discipline
Economics
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This item is protected by copyright and unless otherwise specified the copyright of this thesis/dissertation is held by the author.
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The main purpose of this paper is to investigate the possible relationship between the Capital Asset Pricing Model - CAPM and the prevailing High Frequency Trading (HFT) method of stocks trading and to explain the relationship between them, if exist, with the references from research papers and advanced statistical method. This paper mainly follows Jagannathan and Wang's paper (The Conditional CAPM and the cross-section of expected return, 1996) to explain the capability of CAPM, especially with financial turmoil. However, instead of using the cross-sectional statistical method by following Jagannathan and Wang, the mixed model will be implemented. This paper draws the intermediate conclusion regarding the relationship and shows the existence of relationship, if exist, rather than introducing a new model.
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