S. Sarah Zhang
Karlsruhe Institute of Technology

January 16, 2012

Abstract

Speed matters for the processing of market relevant information and for stock price discovery. We measure and compare the impact of different kinds of information events on high-frequency trading (HFT) and non-HFT (NHFT). Information events are categorized into hard quantitative information shocks and soft qualitative shocks. We find that HFT reaction to hard information is higher and faster than for soft information and they cash in secure profits after a short time period. NHFT reaction is slower and higher for soft information. Furthermore, initiating traders and passive traders complement one another in price discovery: Initiating HFT have a higher influence on short-term price discovery than NHFT and increasingly after hard information shocks. Passive NHFT on the other side have a higher influence in the long run and increasingly after soft information shocks.

Via: Substructural