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

Author

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  • Massa, Massimo
  • von Beschwitz, Bastian
  • Keim, Donald B

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.

Suggested Citation

  • Massa, Massimo & von Beschwitz, Bastian & Keim, Donald B, 2015. "First to ?Read? the News: News Analytics and Institutional Trading," CEPR Discussion Papers 10534, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:10534
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    References listed on IDEAS

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    Cited by:

    1. Dmitri Vinogradov & Yousef Makhlouf, 2021. "Signaling probabilities in ambiguity: who reacts to vague news?," Theory and Decision, Springer, vol. 90(3), pages 371-404, May.
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    3. Blankespoor, Elizabeth & deHaan, Ed & Marinovic, Iván, 2020. "Disclosure processing costs, investors’ information choice, and equity market outcomes: A review," Journal of Accounting and Economics, Elsevier, vol. 70(2).
    4. Omri Even-Tov & Naim Bugra Ozel, 2021. "What moves stock prices around credit rating changes?," Review of Accounting Studies, Springer, vol. 26(4), pages 1390-1427, December.

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    More about this item

    Keywords

    Information; Institutional trading; Stock price reaction; Textual analysis;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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