News Articles and the Invariance Hypothesis

Using a database of news articles from Thomson Reuters for 2003-2008, we investigate how the arrival rate of news articles mentioning an individual stock varies with the level of trading activity in that stock. Defining trading activity W as the product of dollar volume and volatility, we estimate that the arrival rate of news articles is proportional to W0:68. Market microstructure invariance predicts that the stock trading process unfolds in “business time” which passes at a rate proportional to W2=3. Since the estimated exponent of '368 is close to 2/3, we conclude that information in news articles flows into the market in the same units of business time that microstructure invariance predicts to govern the trading process for stocks. The arrival of news articles is well approximated by a negative binomial process with the over-dispersion parameter of 2.11