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Information content of order imbalance in an order-driven market: Indian Evidence

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  • Tripathi, Abhinava
  • Dixit, Alok
  • Vipul,

Abstract

This article examines the information content of order imbalance (OIB), using 195 most active stocks from the National Stock Exchange of India. The private information of order flow has a persistent impact on prices, and makes the short-term returns predictable. The predictability appears strong for the first five minutes, and perishes within thirty minutes. Furthermore, the information inherent in the order flow impacts the deeper levels of limit-order book, indicating the presence of informed traders beyond the best quotes. Overall, the results support the information asymmetry hypothesis for the pure order-driven market of India.

Suggested Citation

  • Tripathi, Abhinava & Dixit, Alok & Vipul,, 2021. "Information content of order imbalance in an order-driven market: Indian Evidence," Finance Research Letters, Elsevier, vol. 41(C).
    • Handle: RePEc:eee:finlet:v:41:y:2021:i:c:s1544612320316779
    DOI: 10.1016/j.frl.2020.101863
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    More about this item

    Keywords

    Order imbalance; Market microstructure; Liquidity; Limit-order book; Information asymmetry; Short-term return predictability;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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