We compare the optimal trading strategy of an informed speculator when he can trade ahead of incoming news (is “fast”), versus when he cannot (is “slow”). We find that speed matters: the fast speculator's trades account for a larger fraction of trading volume, and are more correlated with short‐run price changes. Nevertheless, he realizes a large fraction of his profits from trading on long‐term price changes. The fast speculator's behavior matches evidence about high‐frequency traders. We predict that stocks with more informative news are more liquid even though they attract more activity from informed high‐frequency traders.

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We study how relationship lending determines the financing of innovation. Exploiting a negative shock to relationships, we show that it reduces the number of innovative firms, especially those that depend more on relationship lending such as small, opaque firms. This credit supply shock leads to reallocation of inventors whereby young and productive inventors leave small firms and move out of geographical areas where lending relationships are hurt. Overall, our results show that credit markets affect both the level of innovation activity and the distribution of innovative human capital across the economy. (JEL G21, O3, J61)

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