SSRN-So What Orders Do Informed Traders Use? Evidence from Quarterly Earnings Announcements by Hsiao-Fen Yang

I love when two ideas are in direct competition and are testable. For instance, suppose you have information that you want to trade on. If you trade too aggressively you will move the market (and if it is inside information get caught!). On the other hand, if you wait too long, the information is released to the public and your advantage is gone.

A new working paper by Hsiao-Fen Yang looks at this and finds evidence that seems to sugest that informed traders are sneaky at first, but as the information release date gets closer, they get more aggressive. Which is a really cool story.

Here is some from the abstract:

SSRN-So What Orders Do Informed Traders Use? Evidence from Quarterly Earnings Announcements by Hsiao-Fen Yang:

"Because informed traders expect their information advantage will disappear after the announcements, this information event provides a unique opportunity to test whether informed traders become more impatient and use more aggressive orders when the announcement is approaching. Our results show that when the information will be released soon but there is still enough time for the execution (from day -10 to day -6), informed investors use small orders and limit orders to trade stealthily and reduce price risk. Within five days right before the announcements, informed investors trade more aggressively. They start using large market orders to ensure the execution...."

Ok, so this is just an abstract, so it may or may not be a good paper, but I will take the chance given the author has done quite a bit of work in the market-microstructure field and it is a nice intuitive story. Unfortunately I have not seen the paper. I will email the author and update this link if I find a version online.