Information shocks, disagreement, and drift

Will J. Armstrong, Laura Cardella, Nasim Sabah

Research output: Contribution to journalArticlepeer-review

Abstract

We examine the effects of investor disagreement on price discovery using a recurring public information event in the highly liquid crude oil futures market, a market free of short sale constraints. We show that prices reflect positive news within one-half second of trading but continue to drift for five minutes when news is negative. Evidence suggests the drift arises from a systematic surge in buying pressure that impedes the price discovery process when news is negative. Our results are consistent with price drift arising from differences in trading horizons, where traders taking long positions condition trades on information beyond the news.

Original languageEnglish
JournalJournal of Financial Economics
DOIs
StateAccepted/In press - 2021

Keywords

  • Asymmetric price drift
  • Disagreement
  • High frequency trading
  • Intraday news

Fingerprint Dive into the research topics of 'Information shocks, disagreement, and drift'. Together they form a unique fingerprint.

Cite this