Order imbalances explain 90% of returns of Nikkei 225 futures

Meng Li, Misao Endo, Shiwei Zuo and Kazuo Kishimoto

Applied Economics Letters, 2010, vol. 17, issue 13, 1241-1245

Abstract: This article introduces a new kind of order imbalance - limit order imbalance - in addition to the conventional order imbalance to explain the intraday stock returns. The conventional order imbalance together with our new order imbalance are shown to explain more than 90% of intraday returns of the Nikkei 225 Futures in the Osaka Stock Exchange in Japan. It is also found that a scaling by spreads substantially increases the explanatory power in thinner markets.

Date: 2010
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DOI: 10.1080/00036840902881819

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