Price formation, market quality and the effects of reduced latency in the very short run

Matthias Bank and Ralf H. Baumann

Research in International Business and Finance, 2016, vol. 37, issue C, 629-645

Abstract: Applying an innovative event study methodology to ultra short return horizons, this paper resolves market adjustment in the aftermath of corporate news events with unprecedented precision. It uncovers the ramifications of the reduction in latency of the German stock market on April 23rd 2007 and shows that it has had positive consequences for market quality. Analyzing second by second time windows the paper demonstrates that price determination, market efficiency as well as quoted spreads and order flow have significantly improved not only in broad average terms, but in particular during informative events.

Keywords: Market quality; Market latency; Germany (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:37:y:2016:i:c:p:629-645

DOI: 10.1016/j.ribaf.2016.01.010

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