The Influence of Real-Time Stock-Specific Messages on Liquidity, Returns, and Trading Behavior

Emanuel Albin Kopp; Michael Hütl; Otto Loistl

The Influence of Real-Time Stock-Specific Messages on Liquidity, Returns, and Trading Behavior

Emanuel Albin Kopp, Michael Hütl, Otto Loistl

Publikation: Working/Discussion Paper › Working Paper/Preprint

Abstract

Most studies focus on the effects of some type of anticipated information release,
like earnings or dividend announcements, or on macroeconomic news. In contrast,
we study the effect of strictly company-specific news items routed in real-time to
the trading screens. It is examined whether the real-time flow of company-specific
messages influences trading in highly liquid DAX-30 securities. The news impact
is investigated using full-displayed open limit order book data from the Xetra electronic
trading system. Our findings support the suggestion that traders monitor the
information flow and actively react to this type of information disclosure. We find
that liquidity deteriors and that returns fall considerably around the time of news
release. Hence, earnings or dividend announcement are not the only source of relevant information. Moreover, traders tend to herd in their decisions to buy or to sell
around the time of news release. We further show that time- and stock-specific excess
performance in returns and liquidity is considerably driven by common factors
across stocks.

Originalsprache	Englisch
Publikationsstatus	Veröffentlicht - 1 Sept. 2008

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Zitat

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