Much of the literature has used small samples to show that
fast trading or low latency trading (LLT) improves efficiency at
extremely high frequencies. Since corporate decisions are low
frequency events, it is not clear whether LLT facilitates pricing
of companies’ public information releases. This paper uses a
comprehensive cross-sectional and time-series sample to
provide causal evidence that LLT enhances efficiency around
earnings announcements, i.e., at low frequencies. Low latency
traders, trade aggressively at the time of the earnings
announcements such that the information in earnings
surprises is quickly incorporated into prices and the post
announcement drift is reduced.