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http://ssrn.com/abstract=2188822
 
 

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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

October 1, 2014

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"). Speed matters: the trades of a fast speculator account for a much larger fraction of trading volume, and are much more correlated with short run price changes. Nevertheless, the fast speculator realizes a large fraction of his profits from trading on long term price changes as well. The footprints of the fast speculator match evidence about high frequency traders. We predict that stocks with more informative news should attract more activity from informed high frequency traders, and yet these stocks should be more liquid.

Number of Pages in PDF File: 55

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

JEL Classification: G14, D82, D83

working papers series





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Date posted: December 14, 2012 ; Last revised: October 1, 2014

Suggested Citation

Foucault, Thierry and Hombert, Johan and Rosu, Ioanid, News Trading and Speed (October 1, 2014). 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 (Groupe HEC) - 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 (Groupe HEC) - Finance Department ( email )
1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

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

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References:  34
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