We compare the optimal trading strategy of an informed speculator when he can trade ahead of incoming news (is “fast”), versus when he cannot (is “slow”). We find that speed matters: the fast speculator's trades account for a larger fraction of trading volume, and are more correlated with short-run price changes. Nevertheless, he realizes a large fraction of his profits from trading on long-term price changes. The fast speculator's behavior matches evidence about high-frequency traders. We predict that stocks with more informative news are more liquid even though they attract more activity from informed high-frequency traders.
© 2001-2024 Fundación Dialnet · Todos los derechos reservados