This article studies differences in the information content of 870,000 news announcements in 56 markets around the world. In most developed markets, a firm's stock price moves much more on days with public news about the firm. In contrast, in many emerging markets volatility is similar on news and non-news days. We examine several hypotheses for our findings. Crosscountry differences in stock price reactions are best explained by insider trading, followed by differences in the quality of the news dissemination mechanism. Our findings are useful for quantifying the extent of insider trading and how the financial media affects international markets. (JEL G14, G15) Public news announcements are a major mechanism for disseminating information to investors. Each day the financial media releases thousands of articles covering companies in markets worldwide. Investors use this news to estimate assets' fundamental values. Despite the perceived importance of the The first two authors are from the McCombs School of Business at the University of Texas at Austin.

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This study provides evidence that high-frequency traders (HFTs) identify patterns in past trades and orders that allow them to anticipate and trade ahead of other investors’ order flow. Specifically, HFTs’ aggressive purchases and sales lead those of other investors, and this effect is stronger at times when it is more difficult for non-HFTs to disguise their order flow. Consistent with some HFTs being more skilled or more focused on anticipatory strategies, I show that trades from a subset of HFTs consistently predict non-HFT order flow the best. The results are not explained by HFTs reacting faster to news or past returns, by contrarian or trend-chasing behavior by non-HFTs, or by trader misclassification. These findings support the existence of an anticipatory trading channel through which HFTs increase non-HFT trading costs. This paper was accepted by Karl Diether, finance.

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