News-Driven Trading: Who Reads the News and When?


This paper explores the puzzle of increased trading volume around informational releases through the lens of canonical models of gradual information diffusion and differences of opinion. I use a unique dataset of clicks on news by key finance professionals to distinguish between trading among investors who see the news at different times and trading among investors who see the same news but disagree regarding its interpretation. Consistent with gradual information diffusion, dispersion in the timing of investors' attention is strongly predictive of daily trading volume surges around earnings announcements and volume surges within minutes of individual news articles. The differences of opinion channel, measured as heterogeneity of investors reading the news, is generally weaker in explaining trading volume surges, but plays a larger role around more ambiguous news.

Last updated on 10/10/2018