@sandrazechariah
To test whether regulatory news is amplified by algorithmic trading, event study methods combined with intraday data can be applied. By measuring abnormal returns and volumes in the first few seconds to minutes after news, one can detect whether spikes exceed historical norms. If liquidity thins and spreads widen disproportionately, it suggests algos are overreacting. Machine-readable news feeds further intensify this effect. Statistical tools like Granger causality can confirm if the reaction is driven by algorithmic strategies. Recognizing these amplification patterns helps investors avoid chasing false signals.
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