Abstract

http://ssrn.com/abstract=2188822
 
 

References (28)



 
 

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News Trading and Speed


Thierry Foucault


HEC Paris - Finance Department

Johan Hombert


HEC Paris - Finance Department

Ioanid Rosu


HEC Paris - Finance Department

January 19, 2016

Journal of Finance, Vol. 71, pp. 335-382, 2016
HEC Paris Research Paper No. 975/2013

Abstract:     
We compare the optimal trading strategy of an informed speculator when he can trade ahead of incoming news (is "fast"), versus when he cannot (is "slow"). We find that speed matters: the fast speculator's trades account for a larger fraction of trading volume, and are more correlated with short-run price changes. Nevertheless, he realizes a large fraction of his profits from trading on long-term price changes. The fast speculator's behavior matches evidence about high frequency traders. We predict that stocks with more informative news are more liquid even though they attract more activity from informed high frequency traders.

Number of Pages in PDF File: 55

Keywords: News, liquidity, volume, price discovery, high frequency trading

JEL Classification: G14, D82, D83


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Date posted: December 14, 2012 ; Last revised: January 19, 2016

Suggested Citation

Foucault, Thierry and Hombert, Johan and Rosu, Ioanid, News Trading and Speed (January 19, 2016). Journal of Finance, Vol. 71, pp. 335-382, 2016; HEC Paris Research Paper No. 975/2013. Available at SSRN: http://ssrn.com/abstract=2188822 or http://dx.doi.org/10.2139/ssrn.2188822

Contact Information

Thierry Foucault
HEC Paris - Finance Department ( email )
1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France
(33)139679569 (Phone)
(33)139677085 (Fax)
HOME PAGE: http://thierryfoucault.com/

Johan Hombert
HEC Paris - Finance Department ( email )
1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

Ioanid Rosu (Contact Author)
HEC Paris - Finance Department ( email )
1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

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References:  28
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