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News Articles and Equity Trading

Author

Listed:
  • Albert S. Kyle

    (Robert H. Smith School of Business, University of Maryland)

  • Anna Obizhaeva

    (New Economic School)

  • Nitish Ranjan Sinha

    (Board of Governors of the Federal Reserve System)

  • Tugkan Tuzun

    (Board of Governors of the Federal Reserve System)

Abstract

Using a database of news articles from Thomson Reuters for 2003-2008, we investigate how the arrival rate of news articles mentioning an individual stock varies with the level of trading activity in that stock. Defining trading activity W as the product of dollar volume and volatility, we estimate that the arrival rate of news articles is proportional to W0.68. Market microstructure invariance predicts that the stock trading process unfolds in "business time" which passes at a rate proportional to W2=3. Since the estimated exponent of 0.68 is close to 2=3, we conclude that information in news articles ows into the market in the same units of business time that microstructure invariance predicts to govern the trading process for stocks. The arrival of news articles is well approximated by a negative binomial process with the over-dispersion parameter equal to 2:11.

Suggested Citation

  • Albert S. Kyle & Anna Obizhaeva & Nitish Ranjan Sinha & Tugkan Tuzun, 2017. "News Articles and Equity Trading," Working Papers w0233, Center for Economic and Financial Research (CEFIR).
    • Handle: RePEc:cfr:cefirw:w0233
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    File URL: http://www.cefir.ru/papers/WP233.pdf
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    References listed on IDEAS

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    Cited by:

    1. Torben G. Andersen & Oleg Bondarenko & Albert S. Kyle & Anna Obizhaeva, 2016. "Intraday Trading Invariance in the E-mini S&P 500 Futures Market," Working Papers w0229, New Economic School (NES).

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