Article first published online: 9th August 2018 DOI: 10.1111/jofi.12717
When unscheduled news arrives, investors react with a stochastic delay yet still may exploit new information. In this context, I study the equilibrium dynamics of limit order markets. Continuous idiosyncratic liquidity shocks result in trades on both sides of the order book. News therefore arrives at random times. Following news, order flows become imbalanced and market depth is consumed, leading to positive covariance between price variability, trading volume, and order book imbalances. Holding the unconditional price variability constant, news frequency has a negative effect on both market depth and the variability‐volume covariance.