Need for Speed: An Empirical Analysis of Hard and Soft Information in a High Frequency World

Time: 1.00pm - 2.00pm
Venue: R407 (FMG Library), 4th Floor, Lionel Robbins Building.
Speaker: Sarah Zhang (Manchester Business School)
Seminar title: Need for Speed: An Empirical Analysis of Hard and Soft Information in a High Frequency World

Abstract: We study the role of high frequency traders (HFTs) and non-HFTs in processing hard index price information and soft news information. We show that HFTs and non-HFTs play complementing roles in processing hard and soft information. On one side, we find that HFTs dominate non-HFTs in processing hard information by exhibiting a stronger reaction after the hard information shocks. Thereby, they create a stronger linkage between the futures and stock markets. We demonstrate that speed matters for hard information processing and realizing trading gains due to high short-run trading profits. On the other side, soft news information is primarily processed by non-HFTs and is incorporated into stock prices for a longer amount of time.