Abstract

http://ssrn.com/abstract=2361311
 


 



Early Peek Advantage?


Grace Xing Hu


School of Economics and Finance; University of Hong Kong

Jun Pan


Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA); National Bureau of Economic Research (NBER); China Academy of Financial Research (CAFR)

Jiang Wang


MIT; China Academy of Financial Research (CAFR); National Bureau of Economic Research (NBER)

November 29, 2013


Abstract:     
From 2007 to June 2013, a small group of fee-paying, high-speed traders receive the results of the Michigan Index of Consumer Sentiment (ICS) from Thomson Reuters at 9:54:58, two seconds before the broader release. Focusing on the trading and price behavior in E-mini S&P 500 futures, we find that this tiered information release results in highly concentrated and coordinated trading by high-speed traders during the first second of the early peek window at 9:54:58. It also leads to super fast price discovery. Most of the price adjustment in reaction to the ICS news is accomplished during the first 10% of the trades at 9:54:58, which lasts about 15 milliseconds. More important, we find no evidence of further price drift after the initial price discovery. The scope of the early peek advantage is therefore narrowly contained within a time window populated mostly by the fee-paying, high-speed traders. Outside of this narrow window, general investors trade at fully adjusted prices and is not disadvantaged by the early peek of a few. On the contrary, our further results suggest that such concentrated trading among high-speed traders with pre-arranged early peek might actually be beneficial in the sense that they help improve the efficiency of price discovery.

Number of Pages in PDF File: 46

Keywords: Market Efficiency, Multi-tiered Information Release, High-frequency Trading

JEL Classification: G14, G12

working papers series





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Date posted: November 30, 2013  

Suggested Citation

Hu, Grace Xing and Pan, Jun and Wang, Jiang, Early Peek Advantage? (November 29, 2013). Available at SSRN: http://ssrn.com/abstract=2361311 or http://dx.doi.org/10.2139/ssrn.2361311

Contact Information

Grace Xing Hu (Contact Author)
School of Economics and Finance; University of Hong Kong ( email )
1108 K.K.Leung
Pokfulam Road
Hong Kong, Pokfulam HK
China
2219-4178 (Phone)
Jun Pan
Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA) ( email )
77 Massachusetts Avenue
Cambridge, MA 02139-4307
United States
617-253-3083 (Phone)
617-258-6855 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
China Academy of Financial Research (CAFR)
1954 Huashan Road
Shanghai P.R.China, 200030
China

Jiang Wang
MIT ( email )
E62-614
100 Main Street
Cambridge, MA 02142
United States
617-253-2632 (Phone)
617-258-6855 (Fax)
China Academy of Financial Research (CAFR)
1954 Huashan Road
Shanghai P.R.China, 200030
China

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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