Order Imbalance and Intraday Price Discovery: Evidence from Chinese Stock Markets

Zhaohui Zhang (), Jiamin Wang () and Ronald Bremer ()
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Zhaohui Zhang: College of Management, Long Island University – CW Post, Brookville, NY 11548, USA
Jiamin Wang: College of Management, Long Island University – CW Post, Brookville, NY 11548, USA
Ronald Bremer: Rawls College of Business, Texas Tech University, Lubbock, TX 79409, USA

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2011, vol. 14, issue 04, 693-714

Abstract: In this paper, we study the relation between order imbalances (buyer versus seller-initiated trades measured by a buy ratio) at an early trading hour and intraday price discovery in the Chinese stock markets. We find that the volatility of order imbalances is the highest around the open. There is strong evidence that order imbalances in the early trading hours have significant predictive power to intraday price discovery. The intraday returns of the high buy-ratio quintiles are significantly higher than those of the low buy-ratio ones. The evidence indicates that the information incorporated in early trading signals the intraday price discovery, and the information around the open dominates that revealed over the rest of the trading day.

Keywords: Price discovery; order imbalance; intraday volume; intraday volatility; Chinese stock markets (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2011
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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DOI: 10.1142/S0219091511500019

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