Short-Lived Information and Order Strategies: A Clinical Study

Managerial Finance, Vol. 38, No. 2, pp. 143-164, 2012

44 Pages Posted: 26 Jan 2010 Last revised: 4 Feb 2012

See all articles by Adam Y.C. Lei

Adam Y.C. Lei

Midwestern State University

Huihua Li

St. Cloud State University

Date Written: August 15, 2011

Abstract

We examine investor order strategies in response to short-lived information using a natural experiment on September 8, 2008, in which a 2002 bankruptcy story on United Airlines erroneously reappears through Bloomberg terminals and cause significant price changes on the stock. Our results show that investors use intermarket sweep orders (ISOs), a unique type of liquidity-demanding limit orders, in attempts to exploit this information. In particular, those investors show aggressiveness not only in trade speed but also in trade size. These findings support the hypothesis that investors with short-lived information demand immediacy to conserve the value of their information and have important research and practical implications.

Keywords: Order strategies, market efficiency, intermarket sweep orders, UAL, UAUA

JEL Classification: G10, G14

Suggested Citation

Lei, Adam Y.C. and Li, Huihua, Short-Lived Information and Order Strategies: A Clinical Study (August 15, 2011). Managerial Finance, Vol. 38, No. 2, pp. 143-164, 2012, Available at SSRN: https://ssrn.com/abstract=1474933

Adam Y.C. Lei (Contact Author)

Midwestern State University ( email )

3410 Taft Blvd
Wichita Falls, TX 76308
United States
(940) 397-4403 (Phone)
(940) 397-4693 (Fax)

HOME PAGE: http://www.adamyclei.com/

Huihua Li

St. Cloud State University ( email )

Saint Cloud, MN 56301
United States
(320) 308-3231 (Phone)
(320) 255-3986 (Fax)

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