Market Efficiency in Real-Time

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Abstract
The Morning Call and Midday Call segments on CNBC TV provide a unique opportunity to shed light on the efficient market hypothesis. The segments report analysts' views about individual stocks and are broadcast when the market is open. We find that prices respond to the reports within seconds of the initial mention, with positive reports fully incorporated within one minute. The impact of negative reports is gradual, lasting 15 minutes. We find compelling evidence that viewers trade based on the information in the segments. Trading intensity doubles in the minute after the stock is mentioned on air, with a significant increase in buyer- (seller-) initiated trades after positive (negative) reports. Traders who lock in prices within 15 seconds of the initial mention make small but significant profits by trading on positive reports during the Midday Call. Our results highlight the role that active traders play in ensuring that prices quickly reflect new information.

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