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ISO order imbalances and individual stock returns

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  • Justin Cox

Abstract

I examine the relation between intermarket sweep order (ISO) order imbalances and the daily returns of individual stocks. First, I show that ISO order imbalances are positively related to contemporaneous returns. Second, I find that price pressures emanating from ISO imbalances are persistent and predict cumulative abnormal returns up to 2 months. The predictive power of ISO order imbalances on contemporaneous and future abnormal returns is strongest for firms in the smallest firm size quintile. Finally, I analyze herding among ISO order imbalances and find strong commonality. My results indicate that ISOs contribute to both short‐ and long‐term return formation.

Suggested Citation

  • Justin Cox, 2021. "ISO order imbalances and individual stock returns," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 44(1), pages 5-23, April.
    • Handle: RePEc:bla:jfnres:v:44:y:2021:i:1:p:5-23
    DOI: 10.1111/jfir.12233
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    Cited by:

    1. Gianluca P. M. Virgilio & Pedro Hector Parco Espinoza, 2023. "The impact of Intermarket Sweep Orders on volatility: an agent-based stock market model," Economics Bulletin, AccessEcon, vol. 43(1), pages 589-595.

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