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Breaking news

Author

Listed:
  • Lars Winkelmann
  • Wenying Yao

Abstract

This paper examines how regulatory interventions in high-frequency financial markets affect price discovery. We focus on Breaking news, where dynamic circuit breakers trigger trading halts immediately after the release of macroeconomic fundamentals. Within a high-frequency signal-in-noise model, we show that triggering rules complicate statistical inference for the price impact of news, rendering conventional non-parametric jump estimators inconsistent. Building on this insight, we develop a regression-based test for fundamental pricing that accounts for non-vanishing transition times. The test compares transition price changes to efficient jumps implied by observable factors. Our empirical analysis of CME E-mini S\&P 500 futures shows that Breaking news are associated with systematic deviations from fundamental pricing, predominantly in the form of overshooting. Our findings highlight a regulatory trade-off: the appeal of simple and transparent circuit breaker rules must be weighed against their cost of preventing fundamentals from being priced contemporaneously, thereby creating adverse incentives and introducing distortions.

Suggested Citation

  • Lars Winkelmann & Wenying Yao, 2026. "Breaking news," Papers 2603.22835, arXiv.org.
    • Handle: RePEc:arx:papers:2603.22835
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    References listed on IDEAS

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