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Stock returns, order imbalances, and commonality: Evidence on individual, institutional, and proprietary investors in China

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  • Bailey, Warren
  • Cai, Jun
  • Cheung, Yan Leung
  • Wang, Fenghua

Abstract

Using a unique dataset from the Shanghai Stock Exchange, we study the relation between daily open-to-close stock returns and order imbalances, and the commonality in order imbalances across individual, institutional, and proprietary investors. We find that institutional (proprietary) order imbalances have a larger price impact, but account for a significantly smaller proportion of daily price fluctuations. Commonality is much stronger for individual, rather than institutional (proprietary), order imbalances. Institutional (proprietary) investors favor large capitalization stocks, and co-movement in institutional (proprietary) order imbalances is stronger for these stocks.

Suggested Citation

  • Bailey, Warren & Cai, Jun & Cheung, Yan Leung & Wang, Fenghua, 2009. "Stock returns, order imbalances, and commonality: Evidence on individual, institutional, and proprietary investors in China," Journal of Banking & Finance, Elsevier, vol. 33(1), pages 9-19, January.
    • Handle: RePEc:eee:jbfina:v:33:y:2009:i:1:p:9-19
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