High-Frequency Traders and Price Informativeness during Earnings Announcements
Neil Bhattacharya, Business Southern Methodist University
Bidisha Chakrabarty, Saint Louis University
Xu (Frank) Wang , Saint Louis University
Updated May 26, 2020
Wall Street Horizon Abstract
Bhattacharya et al finds that given HFTs are the dominant players in today’s equity markets, an examination of their role in the dissemination of firm-specific fundamental information is crucially important. This study is the first to shed light on HFTs’ role in facilitating incorporation of earnings information into prices. Prior research shows that HFTs trade on macroeconomic news (Chordia et al., 2016) and the authors complement this line of inquiry by showing that HFTs are highly active around firm-specific events such as corporate earnings announcements. Finally, the paper provides evidence on how HFT influences the activities of financial analysts. The authors show that HFT participation enhances analysts’ forecasting abilities, suggesting that HFT helps in information diffusion among sophisticated investors.
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