Why do stock prices change dramatically in value within seconds after release of financial results? After all, it is impossible to analyze such a large amount of information in such a short time.
In: Economics
None of the comments here are talking about computers making trades. For over a decade now companies have been running automated trading systems that look at the news and act instantly when it sees positive or negative information on a stock. This is why there is so much more volume of stock trading than there was two decades ago. There is no way for an individual investor to read the news and make a trade in time to beat these systems.
Not only that, some of the computers were set up to watch active trades happening and jump in to buy stocks and resell them at a higher price as the trades were happening. There was one stock exchange founded specifically to try to prevent this.
Read the book Flash Boys by Michael Lewis. It’s a very interesting book that goes into this.
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