Intermarket sweep order trade size clustering around corporate announcements

Intermarket sweep order trade size clustering around corporate announcements

Investors have different trade size preferences depending on their information advantage. Using intermarket sweep orders (ISOs), we find that investors appear to prefer using small, round lot trades around corporate events with higher announcement frequency and more predictable timing, such as earnings announcements. Around these corporate events, information is revealed, and analyst estimates are confirmed or rejected. Conversely, share repurchase announcements happen less frequently and the timing of these announcements are unpredictable. Relative to earnings announcements, share repurchase announcements create more uncertainty than they resolve. We find that when investors have less information, they tend to use costlier, larger trade size multiples. We further support the extant finding that trade sizes are smaller with the advent of high-frequency trading.

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Nguyen, V. H., Holowczak, R., & Mishra, S. (2019). Intermarket sweep order trade size clustering around corporate announcements. Applied Economics, 51(48), 5258–5267. https://doi.org/10.1080/00036846.2019.1612029