Asymmetric News Responses of High‐Frequency and Non‐High‐Frequency Traders

25 Pages Posted: 20 May 2020

Date Written: August 2019

Abstract

Using NASDAQ trade and Reuters news data, I show that the response of aggressive non‐high‐frequency traders (nHFTs) to news is stronger than that of aggressive high‐frequency traders (HFTs). Classifying news into quantitative (“hard”) and less quantitative (“softer”) news, the trading response of aggressive nHFTs to softer news exceeds HFTs’ response. Positive news elicits greater return and nHFT responses than negative news during the 2008 financial crisis period. As this phenomenon persists even after excluding the 2008 short‐sale ban, the results support the hypothesis of nHFTs exhibiting stronger asymmetric responses during crisis periods.

Keywords: financial crisis, high‐frequency trading, information processing, news

JEL Classification: G10, G14

Suggested Citation

Zhang, Sarah, Asymmetric News Responses of High‐Frequency and Non‐High‐Frequency Traders (August 2019). Financial Review, Vol. 54, Issue 3, pp. 451-475, 2019, Available at SSRN: https://ssrn.com/abstract=3601151 or http://dx.doi.org/10.1111/fire.12200

Sarah Zhang (Contact Author)

University of Manchester ( email )

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