Market Efficiency in Real-Time

Goizueta Business School, Emory University

36 Pages Posted: 24 May 2001

See all articles by T. Clifton Green

T. Clifton Green

Emory University - Department of Finance

Jeffrey A. Busse

Emory University - Department of Finance

Date Written: May 2001

Abstract

The Morning Call and Midday Call segments on CNBC TV provide a unique opportunity to shed light on the efficient market hypothesis. The segments report analysts' views about individual stocks and are broadcast when the market is open. We find that prices respond to the reports within seconds of the initial mention, with positive reports fully incorporated within one minute. The impact of negative reports is gradual, lasting 15 minutes. We find compelling evidence that viewers trade based on the information in the segments. Trading intensity doubles in the minute after the stock is mentioned on air, with a significant increase in buyer- (seller-) initiated trades after positive (negative) reports. Traders who lock in prices within 15 seconds of the initial mention make small but significant profits by trading on positive reports during the Midday Call. Our results highlight the role that active traders play in ensuring that prices quickly reflect new information.

Suggested Citation

Green, T. Clifton and Busse, Jeffrey A., Market Efficiency in Real-Time (May 2001). Goizueta Business School, Emory University. Available at SSRN: https://ssrn.com/abstract=270958 or http://dx.doi.org/10.2139/ssrn.270958

T. Clifton Green (Contact Author)

Emory University - Department of Finance ( email )

1300 Clifton Rd.
Atlanta, GA 30322-2710
United States
404-727-5167 (Phone)
404-727-5238 (Fax)

Jeffrey A. Busse

Emory University - Department of Finance ( email )

Atlanta, GA 30322-2710
United States
404-727-0160 (Phone)
404-727-5238 (Fax)

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