Editor’s Letter

Abstract

DaviD anTin CEO Dave BliDe Publisher We open the Summer issue with Blocher, Cooper, Seddon, and Van Vliet’s examination of every NASDAQ ITCH feed message for the S&P 500 Index stocks for 2012. Their f indings shed light on the behavior of high-frequency trades surrounding high levels of cancellation activity. Li studies how stock prices incorporate information in after-hours trading and f inds slow price adjustment that persists under various levels of investor inattention, limited arbitrage capital, and short-sale constraints. Madhavan, Laipply, and Sobczyk illustrate how investors and traders can use intraday estimates as a complement to existing data (such as end-of-day net asset value) to better understand the underlying bond portfolio value during the trading day and for transaction cost analysis. Xie, Liew, Wu, and Zou apply the pairs trading strategy using a copula technique to explicitly capture the marginal distributions as well as the dependency structure between the stock returns. They propose that with a better understanding of the joint distribution of the two stocks, practitioners could gain preferential entry positions and have more trading opportunities. Next, Jha demonstrates a simple tactical trade timing strategy that allows a long-horizon manager to take advantage of short-horizon alphas without incurring additional transaction costs. Zhang, Tang, Prombutr, and Le present findings from their investigation of pre-event trading behaviors and investment returns surrounding Value Line’s Timeliness rank-change announcements. We conclude the issue with Kashyap’s utilization of a fundamentally different model of trading costs to look at the effect of the opening of the Hong Kong–Shanghai Connect, which links the stock exchanges in the two cities. As always, we welcome your submissions. We value your comments and suggestions, so please email us at journals@investmentresearch.org.