An Emperical Analysis of Co-Movements in High- and Low-Frequency Metrics for Financial Market Efficiency

Several high- and low-frequency metrics for financial market efficiency have been proposed in distinct lines of research. We explore the joint dynamics of these metrics. High-frequency metrics co-move across individual stocks, and also co-move with lower-frequency metrics based on monthly reversal, momentum, and price-scaled anomalies. The systematic component of efficiency extracted from the time-series of high- and low- frequency metrics varies with funding liquidity and hedge fund flows, and variables that affect the efficacy of market-making. Thus, microstructural efficiency metrics share a common factor with lower-frequency metrics, and events and policies that affect funding liquidity can impact variations in this factor.

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