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So Many Jumps, So Few News

Yacine AIT-SAHALIA, Chen Xu Li, Chenxu Li

Montreal Econometrics Seminar
joint with the departments of economics of the universities of MontréalQuébec à MontréalConcordia and McGill and with CIRANO

room C-6149 C-6143 (U. de Montréal, Pavillon Lionel-Groulx, 3150, rue Jean-Brillant)

Organizers : Marine Carrasco (U. of Montreal) and Saraswata Chaudhuri (McGill U.)

This paper relates jumps in high frequency stock prices to firm-level, industry and macroeconomic news, in the form of machine-readable releases from Thomson Reuters News Analytics. We begin by examining the relationship from news to price jumps. We find that relevant news, both idiosyncratic and systematic, gets incorporated quickly into prices, as market efficiency suggests. However, in the reverse direction, the situation is different: the vast majority of price jumps do not have identifiable public news that can explain them. We then analyze the various market microstructure features that lead to jumps without news.

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