Order imbalance beta and stock returns

Chunpeng Yang and Xiaoyi Hu

Applied Economics, 2020, vol. 52, issue 56, 6100-6113

Abstract: This paper studies the impact of order imbalance beta on cross-sectional stock returns in the Chinese stock market. We measure the daily order imbalance beta, which is defined as the sensitivity of stock returns to changes in stock order imbalance, and show at the individual stock level that stocks with higher order imbalance betas contemporaneously have higher average returns. Furthermore, we find that higher order imbalance beta stocks tend to be smaller, and have lower trading volumes, lower prices and lower turnover rates. Moreover, we find that the long-horizon (1-, 3-, 6- and 12-month) effect of order imbalance beta on stock returns is consistent with the previous daily effect. Finally, we prove that the positive relationship between order imbalance beta and stock returns is robust in different stock markets in China and when using different minimum day limits (30, 45 and 60 days) to estimate order imbalance beta.

Date: 2020
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DOI: 10.1080/00036846.2020.1784386

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