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News Trading and Speed

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Author Info

  • Foucault , Thierry

    ()

  • Hombert , Johan

    ()

  • Rosu, Ioanid

    ()

Abstract

Speed matters: we show that an investor's optimal trading strategy is significantly different when he observes news faster than others versus when he does not, holding the precision of his signals constant. When the investor has fast access to news, his trades are much more sensitive to news, account for a much bigger fraction of trading volume, and forecast short run price changes. Moreover, in this case, an increase in news informativeness increases liquidity, volume, and the fast investor's share of trading volume. Last, price changes are more correlated with news and trades contribute more to volatility when the investor has fast access to news.

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Bibliographic Info

Paper provided by HEC Paris in its series Les Cahiers de Recherche with number 975.

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Length: 63 pages
Date of creation: 04 Nov 2013
Date of revision:
Handle: RePEc:ebg:heccah:0975

Contact details of provider:
Postal: HEC Paris, 78351 Jouy-en-Josas cedex, France
Web page: http://www.hec.fr/
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Related research

Keywords: Informed trading; news; volatility; volume; price discovery; high frequency trading;

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Cited by:
  1. Hoffmann, Peter, 2014. "A dynamic limit order market with fast and slow traders," Journal of Financial Economics, Elsevier, Elsevier, vol. 113(1), pages 156-169.
  2. Hoffmann, Peter, 2013. "A dynamic limit order market with fast and slow traders," Working Paper Series, European Central Bank 1526, European Central Bank.
  3. Albert J. Menkveld & and, 2014. "Need for Speed? Exchange Latency and Liquidity," Tinbergen Institute Discussion Papers, Tinbergen Institute 14-097/IV, Tinbergen Institute.
  4. Scholtus, Martin & van Dijk, Dick & Frijns, Bart, 2014. "Speed, algorithmic trading, and market quality around macroeconomic news announcements," Journal of Banking & Finance, Elsevier, Elsevier, vol. 38(C), pages 89-105.

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