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How long before news is fully priced in?
- Thread starter kmiklas
- Start date
What qualifies as "news" though? like "Biden rallies western allies in global ‘contest’ against autocrats", is that news? And how do you measure how long it takes to "price in"?
Depends [on the type of news], instantly to years IMO.
How long does it take for news to be fully priced in?
As a litmus test: how long did it take for the market to price in trump’s terrible speech at the inception of COVID? (The one where you said Trump blew it out of the water)
The speech could have gone either way; he could have showed leadership or sow discontent. There was no expectation and it was fully absorbed by the public at the same time.
Varies and I don't think there is an edge to be gained here. Whenever you see momentary swings assumption is news. There is a pending news in China about a possible nuke leak. Test your algo with that since the market has not priced that yet atleast in my opinion. In my limited trading career only once I had a full minute or so to react to the news which specifically said to short spooz. I didn't and blew it up cuz the market was going the opposite way for a minute before a giant red bar come in. This was some time last year when we were near 2960 area.
I think it depends on the type of news. I've often been surprised to not see a quick reaction to some Co. specific news.
Now if Powell were to come and out and say something like..."due to unforeseen conditions, the fed has decided to adjust rates upward in order to...blah blah blah"
That just might get an instant reaction.
Now if Powell were to come and out and say something like..."due to unforeseen conditions, the fed has decided to adjust rates upward in order to...blah blah blah"
That just might get an instant reaction.
As other responders have noticed it depends on the type of news. However, I make most of my income by processing news (I don't use charts) so I would like to expand on that. News goes through 3 phases: Initial, Short term and Long term. In almost all news (earnings, economic, mergers, takeovers, FDA announcements) the initial reaction is instantaneous because automated systems are preprogrammed to process specific parts of the news release text. Next comes the short term reaction based on subsequent earnings conference calls, discussions on the business channel about the news, Twitter reactions, etc. Finally comes the long term reactions when investors see that the initial and short term reactions trends are holding; for example, if a heavily shorted stock comes out with great earnings the shorts will start covering.
No answer is possible because of the use of the word fully in the question.How long does it take for news to be fully priced in?
Anyway why should you care? Assuming it can be determined would a benchmark of less than 100% i.e. 80% be sufficient for trading within a given time period?
It may be an instant and wrong reaction followed by a reversal action.That just might get an instant reaction.