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Intraday technical analysis of individual stocks on the Tokyo Stock Exchange

  • Yamamoto, Ryuichi
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    This paper conducts an intraday technical analysis of individual stocks listed on the Nikkei 225. In addition to the price-based technical rules popularly examined in the literature, we uniquely propose and statistically investigate technical rules that utilize information regarding (1) the order-flow imbalance and (2) the order-book imbalance. Technical analysis using the imbalance-based trading rules is motivated by the evidence presented first in this paper that short-term returns can be predicted from the information regarding the order-flow and order-book imbalances for more than half of Nikkei 225-listed stocks. However, we demonstrate that no strategies, including limit order trading where trading signals are derived from the order-book imbalance, beat the buy-and-hold strategy within our sample. The results imply that past prices and demand/supply imbalances do not contribute to profiting in intraday trading and that non-execution and picking-off risks are too large for limit order trading to be profitable in our sample.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0378426612001756
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    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 36 (2012)
    Issue (Month): 11 ()
    Pages: 3033-3047

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    Handle: RePEc:eee:jbfina:v:36:y:2012:i:11:p:3033-3047
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