A Continuous-Time Measurement of the Buy-Sell Pressure in a Limit Order Book Market

Anthony Hall and Nikolaus Hautsch

No 2004/03, FRU Working Papers from University of Copenhagen. Department of Economics. Finance Research Unit

Abstract: In this paper, we investigate the buy and sell arrival process in a limit order book market. Using an intensity framework allows to estimate the simultaneous buy and sell intensity and to derive a continuous-time measure for the buy-sell pressure in the market. Based on limit order book data from the Australian Stock Exchange (ASX), we show that the buy-sell pressure is particularly influenced by recent market and limit orders and the current depth in the ask and bid queue. We find evidence for the hypothesis that traders use order book information in order to infer from the price setting behavior of market participants. Furthermore, our results indicate that the buy-sell pressure is clearly predictable and is a significant determinant of trade-to-trade returns and volatility.

Keywords: buy and sell arrival process; order book information; market depth; bivariate autoregressive intensity model; buy-sell excess intensity (search for similar items in EconPapers)
JEL-codes: C32 C41 G14 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2004-09
New Economics Papers: this item is included in nep-fin
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Citations: View citations in EconPapers (11)

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Related works:
Working Paper: A Continuous-Time Measurement of the Buy-Sell Pressure in a Limit Order Book Market (2004)
Working Paper: A Continuous-Time Measurement of the Buy-Sell Pressure in a Limit Order Book Market (2004)
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