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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

May 29, 2013

HEC Paris Research Paper No. 975/2013

Abstract:     
Speed matters: we show that an investor's optimal trading strategy is significantly different when he observes news faster than others versus when he does not, holding the precision of his signals constant. When the investor has fast access to news, his trades are much more sensitive to news, account for a much bigger fraction of trading volume, and forecast short run price changes. Moreover, in this case, an increase in news informativeness increases liquidity, volume, and the fast investor's share of trading volume. Last, price changes are more correlated with news and trades contribute more to volatility when the investor has fast access to news.

Number of Pages in PDF File: 63

Keywords: Informed trading, news, volatility, 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: September 27, 2013

Suggested Citation

Foucault, Thierry and Hombert, Johan and Rosu, Ioanid, News Trading and Speed (May 29, 2013). 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://www.hec.fr/foucault

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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