First to 'Read' the News: News Analytics and Institutional Trading

67 Pages Posted: 13 Apr 2015

See all articles by Bastian von Beschwitz

Bastian von Beschwitz

Board of Governors of the Federal Reserve System

Donald B. Keim

University of Pennsylvania - Wharton School

Massimo Massa

INSEAD - Finance

Date Written: April 2015

Abstract

We investigate whether providers of high frequency news analytics affect the stock market. As identification, we exploit a unique experiment based on differences in news event classifications 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, and increases illiquidity immediately after the article. Furthermore, we document that traders learn dynamically about the precision of news analytics.

Keywords: Information, Institutional Trading, Stock Price Reaction, Textual Analysis

JEL Classification: G10, G12, G14

Suggested Citation

von Beschwitz, Bastian and Keim, Donald B. and Massa, Massimo, First to 'Read' the News: News Analytics and Institutional Trading (April 2015). CEPR Discussion Paper No. DP10534. Available at SSRN: https://ssrn.com/abstract=2593817

Bastian Von Beschwitz

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Donald B. Keim (Contact Author)

University of Pennsylvania - Wharton School ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
215-898-7685 (Phone)
215-898-6200 (Fax)

Massimo Massa

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
+33 1 6072 4481 (Phone)
+33 1 6072 4045 (Fax)

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