Short‐lived information and order strategies: a clinical study

Purpose – The purpose of this paper is to examine the order strategies of investors, in particular their use of intermarket sweep orders (ISOs), in response to a short‐lived information event.Design/methodology/approach – This paper uses a natural experiment on September 8, 2008, in which a 2002 bankruptcy story of United Airlines erroneously reappears through Bloomberg terminals and cause significant price changes on the stock. The authors first provide the background information of this natural experiment and use bootstrapping methods and regression analyses to examine investors' use of intermarket sweep orders.Findings – The results show that investors use intermarket sweep orders, a unique type of liquidity‐demanding limit orders, in attempts to exploit their short‐lived 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 o...