Order Flow Persistence in Equity Spot and Futures Markets: Evidence from a Dynamic Emerging Market
Shaen Corbet (),
Duc Khuong Nguyen and
No 2019-011, Working Papers from Department of Research, Ipag Business School
Order flows have important implications for well-functioning financial markets because they impose constraints on the interactions between economic agents in terms of both order flow and prices. This paper provides empirical evidence of order flow persistence for the largest stocks traded on Borsa Istanbul, including their corresponding futures contracts. We also place special attention to the specific differences, in terms of persistence features, that could exist between the spot and futures markets. This relationship is further analysed with respect to the introduction of a new trading system in 2015, which created an entry point for high-frequency traders to trade Turkish stocks, while this same avenue was unavailable to the futures markets. Using a battery of long-memory tests, we show that: (i) across all of the testing procedures that we implemented, the spot markets exhibit higher order flow persistence than the futures markets; (ii) order flow persistence is found to increase substantially more in stocks rather than futures contracts after the introduction of high-frequency trading in the stock markets; and (iii) herding and order-splitting are both found to be responsible for these differing order flow persistence effects.
Keywords: Long memory; Hurst exponent; Order flow persistence; Stocks; Futures Contracts. (search for similar items in EconPapers)
Pages: 35 pages
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://faculty-research.ipag.edu/wp-content/uploa ... IPAG_WP_2019_011.pdf (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ipg:wpaper:2019-011
Access Statistics for this paper
More papers in Working Papers from Department of Research, Ipag Business School Contact information at EDIRC.
Bibliographic data for series maintained by Ingmar Schumacher ().