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Unscheduled News and Market Dynamics

Dugast, Jérôme (2018), Unscheduled News and Market Dynamics, The Journal of Finance, 73, 6, p. 2537-2586. 10.1111/jofi.12717

Type
Article accepté pour publication ou publié
External document link
https://doi.org/10.1111/jofi.12717; https://doi.org/10.1111/jofi.12717
Date
2018
Journal name
The Journal of Finance
Volume
73
Number
6
Publisher
Wiley
Pages
2537-2586
Publication identifier
Metadata
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Author(s)
Dugast, Jérôme
Dauphine Recherches en Management [DRM]
Abstract (EN)
When unscheduled news arrives, investors react with a stochastic delay yet still may exploit new information. In this context, I study the equilibrium dynamics of limit order markets. Continuous idiosyncratic liquidity shocks result in trades on both sides of the order book. News therefore arrives at random times. Following news, order flows become unbalanced and market depth is consumed, leading to positive covariance between price variability, trading volume, and order book unbalances. Holding the unconditional price variability constant, news frequency has a negative effect on both market depth and the variability‐volume covariance.
Subjects / Keywords
financial markets; stocks; order; trade
JEL
G15 - International Financial Markets
L14 - Transactional Relationships; Contracts and Reputation; Networks