Posted on 10/28/2010 2:38:44 PM PDT by blam
No, The Average Stock Holding Period Is Not 11 Seconds
Barry Ritholtz, The Big Picture
Oct. 28, 2010, 2:26 PM
Barry Ritholtz is author of the blog The Big Picture.
There’s been this meme circulating that 70% of all trading volume on the exchanges is HFT, and that the average holding period for stocks is 11 seconds. Punch into Google “Average Stock Holding Period: 11 Seconds” and you get 850,000 results.
The problem is, none of these data points are backed up with real data. I set about tracking down where this meme came from.
I first read this number in an interview with Peter Cohan in Marketplace. I tagged Peter, and he gave me Bloomberg as the source for the 70%. That Bloomberg article quotes Raymond James analyst Patrick O’Shaughnessy, who appears to have guessed that “High-frequency trading may account for 70 percent of share volume in the U.S.” But that “may” means its just a guess, not backed up with data. I suspect that 70% estimate somehow morphed into a fact. (I’ll reach out to O’Shaughnessy to see what he says)
As to the 11 seconds holding period, here is the NYT:
“The founder of Tradebot, in Kansas City, Mo., told students in 2008 that his firm typically held stocks for 11 seconds. Tradebot, one of the biggest high-frequency traders around, had not had a losing day in four years, he said.”
This 11 seconds data point is 1) a rough number, 2) without much supporting data; 3) spitballed to a group of students, 4) for one small HFT firm.
Other people have looked at holding periods and came up with far longer holds. David Hunkar recently wrote:
[snip]
(Excerpt) Read more at businessinsider.com ...
The guy is completely right about the 11 seconds being wrong, just not the way he wants. He claims the average time is much longer, but if he actually plowed through all the real-time data on the market (which they would never allow him to do) he would probably find out that 11 seconds is way to long when the HFT algos are flipping in out of stocks in hundredths of a second. This article is nothing more than damage control for the rigged casino we call the stock market.
Yup. Come on back in...the water is fine.
I wonder what the “median” hold time is.
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