High‐frequency trading has led to widespread efforts to reduce information propagation delays between physically distant exchanges. Using relativistically correct millisecond‐resolution tick data, we document a three millisecond decrease in one‐way communication time between the Chicago and New York areas that occurred from April 27, 2010 to August 17, 2012. We attribute the first segment of this decline to the introduction of a latency‐optimized fiber optic connection in late 2010. A second phase of latency decrease can be attributed to line‐of‐sight microwave networks, operating primarily in the 6–11 GHz region of the spectrum, licensed during 2011 and 2012. Using publicly available information, we estimate these networks' latencies, costs, and bandwidths.

This study examines investor response to three events that help define a federal class action securities lawsuit, specifically, the announcement that names an issuer as a defendant in the lawsuit (at the class action filing date), the disclosure or accounting restatement that 'corrects' the information deficiency (at the end of the class period), and the date at which the fraud on the market allegedly begins (at the beginning of the class period). We document a significant and predictable stock price response at each of these three events. Our tests also indicate that the market interprets these events not in isolation but as sequential and conditional events. Investor response differs on the basis of the characteristics of the issuer, the allegations in the complaint, and the outcome of the litigation. These results and the fact that we observe no systematic price momentum in investor response beyond the announcement dates imply that the market is reasonably efficient with respect to information about securities fraud litigation. Our results are robust to alternative definitions and procedures, and are based on a proprietary database that includes almost all federal securities class action lawsuits since 1990.

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