Abstract

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

June 30, 2015

Journal of Finance, Forthcoming
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: July 1, 2015

Suggested Citation

Foucault, Thierry and Hombert, Johan and Rosu, Ioanid, News Trading and Speed (June 30, 2015). Journal of Finance, Forthcoming; 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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