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

Emanuel Albin Kopp, Michael Hütl, Otto Loistl

    Publication: Working/Discussion PaperWorking Paper/Preprint


    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.
    Original languageEnglish
    Publication statusPublished - 1 Sept 2008

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