Speed Acquisition

Speed has become a signature of modern financial markets. This paper theoretically studies investors’ endogenous speed acquisition, alongside their investment in information. Investments in speed and in information are shown intrinsically linked via a novel tension between investors’ intra- and intertemporal competition. Due to this tension, advances in speed technology exert a non-monotone effect on investors’ information acquisition, aggregate price efficiency, as well as firms’ real investment decisions. On the flip side, advances in information technology can also hurt investors' speed acquisition, slowing down the price discovery process. The paper also discusses other testable implications for market qualities.