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Information shocks, disagreement, and drift

Will J. Armstrong, Laura Cardella and Nasim Sabah

Journal of Financial Economics, 2021, vol. 140, issue 3, 916-940

Abstract: We examine the effects of investor disagreement on price discovery using a recurring public information event in the highly liquid crude oil futures market, a market free of short sale constraints. We show that prices reflect positive news within one-half second of trading but continue to drift for five minutes when news is negative. Evidence suggests the drift arises from a systematic surge in buying pressure that impedes the price discovery process when news is negative. Our results are consistent with price drift arising from differences in trading horizons, where traders taking long positions condition trades on information beyond the news.

Keywords: Asymmetric price drift; Disagreement; Intraday news; High frequency trading (search for similar items in EconPapers)
JEL-codes: G12 G13 G14 G23 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.jfineco.2021.02.002

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