58 Pages Posted: 18 Nov 2013 Last revised: 28 Oct 2015
Date Written: October 23, 2015
We investigate whether providers of news analytics affect the stock market. We exploit a unique identification strategy based on revisions between different product releases of a major provider of news analytics. We document a causal effect of news analytics on the market, irrespective of the informational content of the news. Coverage in news analytics speeds up the market reaction in terms of stock price response and trading volume, but temporarily increases illiquidity and can result in temporary price distortions that might increase volatility and reduce market stability. Furthermore, we document that traders learn dynamically about the precision of news analytics.
Keywords: Liquidity, Stock Price Reaction, News Analytics, Information, High Frequency Trading
JEL Classification: G10, G12, G14
Suggested Citation: Suggested Citation
von Beschwitz, Bastian and Keim, Donald B. and Massa, Massimo, First to 'Read' the News: News Analytics and High Frequency Trading (October 23, 2015). Paris December 2015 Finance Meeting EUROFIDAI - AFFI. Available at SSRN: https://ssrn.com/abstract=2356547 or http://dx.doi.org/10.2139/ssrn.2356547
By Lin Tong