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Limit Order Imbalances And Return Predictability
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Book Synopsis Limit Order Imbalances and Return Predictability by : Clive Gaunt
Download or read book Limit Order Imbalances and Return Predictability written by Clive Gaunt and published by . This book was released on 2004 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: An event study methodology is employed to examine the size and predictability of stock price movements subsequent to the occurrence of a limit order imbalance. Whilst existing studies have examined the association between price pressure and stock prices, there has been no research that has directly examined whether information regarding outstanding limit order imbalances at the end of the trading day can be used to predict subsequent stock price movements. The results indicate that a statistically significant mean positive (negative) abnormal return of 0.63 percent (0.64 percent) is experienced on the day subsequent to a buyside (sell-side) order imbalance. Also statistically significant is the finding that 60.00 percent of abnormal returns for firms experiencing buy-side imbalances are positive and 62.15 percent of abnormal returns for firms experiencing sell-side imbalances are negative, suggesting some degree of predictability. It should be noted however, that whilst the size of the abnormal returns and the ratio of positive-to-negative abnormal returns are statistically significant, they are possibly not economically significant in terms of implementing a profitable trading strategy.
Book Synopsis Predictability of Order Imbalance, Market Quality and Equity Cost of Capital by : Daniele Bianchi
Download or read book Predictability of Order Imbalance, Market Quality and Equity Cost of Capital written by Daniele Bianchi and published by . This book was released on 2019 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the effect of the predictability of order imbalance on market quality. We measure the degree of predictability by using the predictive likelihood from a dynamic linear model where the dependent variable is the day-ahead order imbalance. Empirically, we show that increasing order imbalance predictability corresponds to significantly higher market liquidity and efficiency. This positive relationship is economically significant: a long-short portfolio based on past predictability generates significant risk-adjusted returns. Predictability of order imbalance measures a cost of asymmetric information that is not captured by traditional measures of adverse selection. The risk factor that is associated with asymmetric information is priced in the cross-section of stock returns, controlling for a variety of conventional sources of systematic risk. These results suggest the existence of a tight link between market microstructure features affecting order imbalance predictability and both market quality and the cost of capital of firms.
Book Synopsis Limit Order Books by : Frédéric Abergel
Download or read book Limit Order Books written by Frédéric Abergel and published by Cambridge University Press. This book was released on 2016-05-09 with total page 242 pages. Available in PDF, EPUB and Kindle. Book excerpt: A limit order book is essentially a file on a computer that contains all orders sent to the market, along with their characteristics such as the sign of the order, price, quantity and a timestamp. The majority of organized electronic markets rely on limit order books to store the list of interests of market participants on their central computer. A limit order book contains all the information available on a specific market and it reflects the way the market moves under the influence of its participants. This book discusses several models of limit order books. It begins by discussing the data to assess their empirical properties, and then moves on to mathematical models in order to reproduce the observed properties. Finally, the book presents a framework for numerical simulations. It also covers important modelling techniques including agent-based modelling, and advanced modelling of limit order books based on Hawkes processes. The book also provides in-depth coverage of simulation techniques and introduces general, flexible, open source library concepts useful to readers studying trading strategies in order-driven markets.
Book Synopsis Order Flow Imbalance Effects on the German Stock Market by : Michael Hanke
Download or read book Order Flow Imbalance Effects on the German Stock Market written by Michael Hanke and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Order flow imbalance refers to the difference between market buy and sell orders during a given period. This paper analyzes effects of order flow imbalance on returns of stocks traded on the German Xetra trading system on a daily basis. It is the first study examining this relation for the German stock market. In contrast to previous studies on other markets, we control for unobserved effects by using a fixed effects panel regression. For the concurrent (or conditional) relation between order imbalance and returns, our results confirm those of the literature. For the question of return predictability from past order imbalances (unconditional relation), our results are partly confirmatory. As a new contribution, we provide evidence for size and liquidity effects for the unconditional relation between order imbalance and returns.
Book Synopsis Bayesian Forecasting and Dynamic Models by : Mike West
Download or read book Bayesian Forecasting and Dynamic Models written by Mike West and published by Springer Science & Business Media. This book was released on 2013-06-29 with total page 720 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this book we are concerned with Bayesian learning and forecast ing in dynamic environments. We describe the structure and theory of classes of dynamic models, and their uses in Bayesian forecasting. The principles, models and methods of Bayesian forecasting have been developed extensively during the last twenty years. This devel opment has involved thorough investigation of mathematical and sta tistical aspects of forecasting models and related techniques. With this has come experience with application in a variety of areas in commercial and industrial, scientific and socio-economic fields. In deed much of the technical development has been driven by the needs of forecasting practitioners. As a result, there now exists a relatively complete statistical and mathematical framework, although much of this is either not properly documented or not easily accessible. Our primary goals in writing this book have been to present our view of this approach to modelling and forecasting, and to provide a rea sonably complete text for advanced university students and research workers. The text is primarily intended for advanced undergraduate and postgraduate students in statistics and mathematics. In line with this objective we present thorough discussion of mathematical and statistical features of Bayesian analyses of dynamic models, with illustrations, examples and exercises in each Chapter.
Book Synopsis Time Series Analysis by State Space Methods by : James Durbin
Download or read book Time Series Analysis by State Space Methods written by James Durbin and published by OUP Oxford. This book was released on 2012-05-03 with total page 369 pages. Available in PDF, EPUB and Kindle. Book excerpt: This new edition updates Durbin & Koopman's important text on the state space approach to time series analysis. The distinguishing feature of state space time series models is that observations are regarded as made up of distinct components such as trend, seasonal, regression elements and disturbance terms, each of which is modelled separately. The techniques that emerge from this approach are very flexible and are capable of handling a much wider range of problems than the main analytical system currently in use for time series analysis, the Box-Jenkins ARIMA system. Additions to this second edition include the filtering of nonlinear and non-Gaussian series. Part I of the book obtains the mean and variance of the state, of a variable intended to measure the effect of an interaction and of regression coefficients, in terms of the observations. Part II extends the treatment to nonlinear and non-normal models. For these, analytical solutions are not available so methods are based on simulation.
Book Synopsis Ívens saga by : Foster Warren Blaisdell
Download or read book Ívens saga written by Foster Warren Blaisdell and published by . This book was released on 1979 with total page 408 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Market Predictability and Non-Informational Trading by : Terrence Hendershott
Download or read book Market Predictability and Non-Informational Trading written by Terrence Hendershott and published by . This book was released on 2009 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the ability of non-informational order imbalances (buy minus sell volume) to predict daily stock returns at the market level. Using a model with three types of participants (an informed trader, liquidity traders, and a finite number of arbitrageurs), we derive predictions relating returns to lagged returns and lagged order imbalances. Empirical tests using New York Stock Exchange non-informational basket/portfolio trading data provide results consistent with adverse selection at the market-level, but no evidence of limited risk-bearing capacity. Finally, we establish that these market-wide non-informational order imbalances also affect individual stock return comovement by examining additions to the Samp;P500 Index.
Book Synopsis Twenty Years of Economic Reconstruction in East Germany by : Christian Wey
Download or read book Twenty Years of Economic Reconstruction in East Germany written by Christian Wey and published by . This book was released on 2009 with total page 113 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Microstructure of Financial Markets by : Frank de Jong
Download or read book The Microstructure of Financial Markets written by Frank de Jong and published by Cambridge University Press. This book was released on 2009-05-14 with total page 209 pages. Available in PDF, EPUB and Kindle. Book excerpt: The analysis of the microstructure of financial markets has been one of the most important areas of research in finance and has allowed scholars and practitioners alike to have a much more sophisticated understanding of the dynamics of price formation in financial markets. Frank de Jong and Barbara Rindi provide an integrated graduate level textbook treatment of the theory and empirics of the subject, starting with a detailed description of the trading systems on stock exchanges and other markets and then turning to economic theory and asset pricing models. Special attention is paid to models explaining transaction costs, with a treatment of the measurement of these costs and the implications for the return on investment. The final chapters review recent developments in the academic literature. End-of-chapter exercises and downloadable data from the book's companion website provide opportunities to revise and apply models developed in the text.
Book Synopsis Forecasting: principles and practice by : Rob J Hyndman
Download or read book Forecasting: principles and practice written by Rob J Hyndman and published by OTexts. This book was released on 2018-05-08 with total page 380 pages. Available in PDF, EPUB and Kindle. Book excerpt: Forecasting is required in many situations. Stocking an inventory may require forecasts of demand months in advance. Telecommunication routing requires traffic forecasts a few minutes ahead. Whatever the circumstances or time horizons involved, forecasting is an important aid in effective and efficient planning. This textbook provides a comprehensive introduction to forecasting methods and presents enough information about each method for readers to use them sensibly.
Book Synopsis Trades, Quotes and Prices by : Jean-Philippe Bouchaud
Download or read book Trades, Quotes and Prices written by Jean-Philippe Bouchaud and published by Cambridge University Press. This book was released on 2018-03-22 with total page 464 pages. Available in PDF, EPUB and Kindle. Book excerpt: The widespread availability of high-quality, high-frequency data has revolutionised the study of financial markets. By describing not only asset prices, but also market participants' actions and interactions, this wealth of information offers a new window into the inner workings of the financial ecosystem. In this original text, the authors discuss empirical facts of financial markets and introduce a wide range of models, from the micro-scale mechanics of individual order arrivals to the emergent, macro-scale issues of market stability. Throughout this journey, data is king. All discussions are firmly rooted in the empirical behaviour of real stocks, and all models are calibrated and evaluated using recent data from Nasdaq. By confronting theory with empirical facts, this book for practitioners, researchers and advanced students provides a fresh, new, and often surprising perspective on topics as diverse as optimal trading, price impact, the fragile nature of liquidity, and even the reasons why people trade at all.
Book Synopsis Limit Order Trading by : Puneet Handa
Download or read book Limit Order Trading written by Puneet Handa and published by . This book was released on 2008 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper analyzes the rationale for and profitably of limit order trading. Although limit orders are essential to the functioning of order driven markets, their use has received relatively little attention in the literature. Trading via limit order is, in fact, sub-optimal when transaction prices change solely in response to new information. We suggest that in an order driven market a paucity of limit orders can result in order imbalances causing the transaction price to move temporarily away and then revert to the true price. Such short term changes in transaction price can offset losses incurred by limit order traders because of permanent changes in transaction price due to information. Further, we suggest that the markets can be in ecological balance with liquidity driven price changes being just sufficient for the flow of market and limit orders to equilibrate. We use transaction data for the Dow Jones Industrial stocks for 1988 to compare a limit order strategy with a market order strategy, and find that limit order returns conditional on non-execution are lower. We also test the profitability of placing a network of buy and sell limit orders, and document the existence of a limit order spread that is appreciably greater than the posted bid-ask spread. Our findings suggest that trading via limit orders is desirable for participants who are willing to risk non-execution, and that trading via market orders is desirable for participants who are not willing to take the risk.
Book Synopsis Chinese Stock Markets: A Research Handbook by : Dongwei Su
Download or read book Chinese Stock Markets: A Research Handbook written by Dongwei Su and published by World Scientific. This book was released on 2003-01-07 with total page 454 pages. Available in PDF, EPUB and Kindle. Book excerpt: The exponential growth of China's stock markets in the past decade has attracted global attention from academics and practitioners. The practitioner's interest in Chinese markets stems from corporations; investors and financial institutions foresee substantial benefits from investing in China in the long run. However, the academic literature on the development of securities markets and reform of state enterprises in China is still in its infancy and fragmented. This handbook aims to bridge that gap by presenting a wide spectrum of research in the forefront of financial applications. It integrates theory and practice with state-of-the-art statistical techniques and provides numerous insights into the main challenges confronting Chinese markets in the new millennium.
Book Synopsis Market Order Flows, Limit Order Flows and Returns by : Roman Kozhan
Download or read book Market Order Flows, Limit Order Flows and Returns written by Roman Kozhan and published by . This book was released on 2018 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the relation between limit order flow, market order flow and returns. We develop a model where market-makers face inventory risk and adverse selection and show how prices depend on market and limit order flows. In the model, market-makers receive information through trade with customers and optimally split their subsequent trading between market and limit orders so as to exploit this information while controlling risk. Both types of order convey information and impact prices. Empirically, we show that adding limit order flows to regressions of (FX and equity) returns on market order flows greatly improves explanatory power. The price impact of limit orders is positive and smaller than that of market orders. Omitting limit order flows from the regression causes a large downward bias in the price impact of market orders. Thus there is evidence that traders speculate using a combination of limit orders and market orders.
Book Synopsis Trading and Exchanges by : Larry Harris
Download or read book Trading and Exchanges written by Larry Harris and published by OUP USA. This book was released on 2003 with total page 664 pages. Available in PDF, EPUB and Kindle. Book excerpt: Focusing on market microstructure, Harris (chief economist, U.S. Securities and Exchange Commission) introduces the practices and regulations governing stock trading markets. Writing to be understandable to the lay reader, he examines the structure of trading, puts forward an economic theory of trading, discusses speculative trading strategies, explores liquidity and volatility, and considers the evaluation of trader performance. Annotation (c)2003 Book News, Inc., Portland, OR (booknews.com).
Book Synopsis Limit Order Books by : Frédéric Abergel
Download or read book Limit Order Books written by Frédéric Abergel and published by Cambridge University Press. This book was released on 2016-05-09 with total page 241 pages. Available in PDF, EPUB and Kindle. Book excerpt: This text presents different models of limit order books and introduces a flexible open-source library, useful to those studying trading strategies.
