Economics at your fingertips  

Trade Co-occurrence, Trade Flow Decomposition, and Conditional Order Imbalance in Equity Markets

Yutong Lu, Gesine Reinert and Mihai Cucuringu

Papers from

Abstract: The time proximity of high-frequency trades can contain a salient signal. In this paper, we propose a method to classify every trade, based on its proximity with other trades in the market within a short period of time, into five types. By means of a suitably defined normalized order imbalance associated to each type of trade, which we denote as conditional order imbalance (COI), we investigate the price impact of the decomposed trade flows. Our empirical findings indicate strong positive correlations between contemporaneous returns and COIs. In terms of predictability, we document that associations with future returns are positive for COIs of trades which are isolated from trades of stocks other than themselves, and negative otherwise. Furthermore, trading strategies which we develop using COIs achieve conspicuous returns and Sharpe ratios, in an extensive experimental setup on a universe of 457 stocks using daily data for a period of four years.

Date: 2022-09, Revised 2024-03
New Economics Papers: this item is included in nep-int and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link) Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Papers from
Bibliographic data for series maintained by arXiv administrators ().

Page updated 2024-03-15
Handle: RePEc:arx:papers:2209.10334