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News Articles and Equity Trading

Albert Kyle (), Anna Obizhaeva (), Nitish Ranjan Sinha () and Tugkan Tuzun ()
Additional contact information
Albert Kyle: Robert H. Smith School of Business, University of Maryland
Nitish Ranjan Sinha: Board of Governors of the Federal Reserve System
Tugkan Tuzun: Board of Governors of the Federal Reserve System

No w0233, Working Papers from Center for Economic and Financial Research (CEFIR)

Abstract: Using a database of news articles from Thomson Reuters for 2003-2008, we investigate how the arrival rate of news articles mentioning an individual stock varies with the level of trading activity in that stock. Defining trading activity W as the product of dollar volume and volatility, we estimate that the arrival rate of news articles is proportional to W0.68. Market microstructure invariance predicts that the stock trading process unfolds in "business time" which passes at a rate proportional to W2=3. Since the estimated exponent of 0.68 is close to 2=3, we conclude that information in news articles ows into the market in the same units of business time that microstructure invariance predicts to govern the trading process for stocks. The arrival of news articles is well approximated by a negative binomial process with the over-dispersion parameter equal to 2:11.

Pages: 44 pages
Date: 2017-01
New Economics Papers: this item is included in nep-fmk and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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