High-Frequency Market Reactions to Unscheduled Stock-Speci c News- An Empirical Analysis of the Intraday Market Dynamics of the Stockholm Stock Exchange

Abstract

This study examines the e ect of unscheduled stock-speci c news on stock char- acteristics of the Swedish stock market and evaluates the opportunity of con- structing a news trading strategy. It especially focuses on volume and volatility reactions between sixty minutes prior to and after the news releases. There are signi cantly large increases before the news releases, especially prominent for small cap stocks, indicating but not proving the presence of private information among informed investors being exploited. It also validates the hypothesis of the stock market not being perfectly e cient in relation to the E cient Mar- ket Hypothesis. No signi cant correlations between pre and post-news returns were found, complicating the process of constructing a pro table trading strat- egy. However, with further improvements building upon the study, it may be possible in the future.