Do Low Latency Traders Destabilize Prices? Evidence from News Releases
Date: 28 April 2025 11:40-12:40
Location: Corvinus University of Budapest, building E, Institute of Finance – Room E.279.1.
This paper provides evidence that low latency traders (LLTs) hurt market efficiency upon the release of non-earnings news. LLTs behave as speculators and exploit naïve news-chasing investors causing overpriced stocks to become even more overpriced upon the release of high sentiment news. This exacerbation of overpricing, which is subsequently reversed, creates a wedge between prices and the consensus fundamental value and hurts market efficiency. The asymmetric impact of high and low sentiment news on overpriced stocks is driven by more positive news being produced in recent years and investors paying more attention to overpriced stocks.
Joint work with Bin Miao, and Joonki Noh
Please note that this Microsoft Teams link is only in case you are unable to join the seminar, the meeting will generally be held offline.