Need for Speed: An Empirical Analysis of Hard and Soft Information in a High Frequency World

38 Pages Posted: 17 Oct 2012 Last revised: 16 Aug 2017

See all articles by S. Sarah Zhang

S. Sarah Zhang

University of Manchester - Alliance Manchester Business School

Date Written: July 30, 2012

Abstract

We study the role of high frequency traders (HFTs) and non-HFTs in processing hard index price information and soft news information. On one side, we show that HFTs dominate non-HFTs in processing hard information by exhibiting a stronger reaction after the hard information shocks. Thereby, they function as 'messengers' between the futures and stock markets and create a stronger linkage between both markets. We demonstrate that speed matters for hard information processing and realizing trading gains because of high short-run trading pro fits. On the other side, soft news information is primarily processed by non-HFTs and is incorporated into stock prices for a longer amount of time.

Keywords: high-frequency trading, algorithmic trading, information, news trading, price discovery

JEL Classification: G10, G14

Suggested Citation

Zhang, Sarah, Need for Speed: An Empirical Analysis of Hard and Soft Information in a High Frequency World (July 30, 2012). Available at SSRN: https://ssrn.com/abstract=1985951 or http://dx.doi.org/10.2139/ssrn.1985951

Sarah Zhang (Contact Author)

University of Manchester - Alliance Manchester Business School ( email )

Crawford House
Oxford Road
Manchester M13 9PL
United Kingdom

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
1,369
Abstract Views
14,524
Rank
26,570
PlumX Metrics