Chinco, Alexander and Ye, Mao, When Fast Trading Looks Like Priced Noise (January 2, 2015). Available for download at SSRN: http://ssrn.com/abstract=2544738

“Traders with different investment horizons value assets slightly differently. Motivated by this simple insight, we measure the amount of NYSE trading activity at horizons ranging from 1-minute to 1-month long. We find that the quintile of stocks with the most short-horizon trading has more than 123 times as much trading-volume volatility at the 1-minute horizon as the quintile of stocks with the least short-horizon trading. We then model the effect of all this short-run trading on long-run returns. Our model predicts that only stocks with the most trading-volume volatility at the 1-minute horizon should have priced idiosyncratic-return volatility at the monthly horizon, and the data confirm this prediction.”