Friday, January 10, 2014

Fast News

We argued in the textbook that an efficient market reacts rapidly to new information. So how fast does the market react? Pretty quickly according to traders. Dow Jones & Co., publisher of The Wall Street Journal, announced a lawsuit against Ransquawk, a service that "scrapes" articles published online by Dow Jones and others and immediately squawks the news to its subscribers. According to Ransquawk, 8 of the largest 10 banks it the world use the service. Dow Jones argues that Ransquawk is misappropriating "hot news," an action that is not permitted under a 1918 Supreme Court ruling. Given that Ransquawk is a fee-based service, we must assume the banks using the service believe that the extra few seconds gained in hearing about the news is worth the price of the service.