Order Aggressiveness as a Metric to Assess the Usefulness of Accounting Information
The International Journal of Accounting, Vol. 45, pp. 306–333, 2010
Posted: 5 May 2008 Last revised: 28 Nov 2013
Date Written: December 1, 2009
Motivated by the availability of high frequency data on trading activity, this paper proposes to use order aggressiveness as a metric to evaluate the usefulness of accounting information. I test, through an analysis of order aggressiveness, whether earnings announcements of firms listed on the Italian Stock Exchange limit order book have information content. I estimate an ordered probit relating order aggressiveness to unexpected earnings and to three market determinants of aggressiveness. Consistent with the theory on the choice between limit and market orders, I find that order aggressiveness increases with the absolute value of unexpected earnings. The results provide evidence on the extent to which the information contained in earnings is used by traders.
Keywords: Decision usefulness metrics, Disclosure of accounting information, Traders' strategies
JEL Classification: M41, G14
Suggested Citation: Suggested Citation