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Order Imbalance and Intraday Price Discovery: Evidence from Chinese Stock Markets

Author

Listed:
  • Zhaohui Zhang

    (College of Management, Long Island University – CW Post, Brookville, NY 11548, USA)

  • Jiamin Wang

    (College of Management, Long Island University – CW Post, Brookville, NY 11548, USA)

  • Ronald Bremer

    (Rawls College of Business, Texas Tech University, Lubbock, TX 79409, USA)

Abstract

In this paper, we study the relation between order imbalances (buyer versus seller-initiated trades measured by a buy ratio) at an early trading hour and intraday price discovery in the Chinese stock markets. We find that the volatility of order imbalances is the highest around the open. There is strong evidence that order imbalances in the early trading hours have significant predictive power to intraday price discovery. The intraday returns of the high buy-ratio quintiles are significantly higher than those of the low buy-ratio ones. The evidence indicates that the information incorporated in early trading signals the intraday price discovery, and the information around the open dominates that revealed over the rest of the trading day.

Suggested Citation

  • Zhaohui Zhang & Jiamin Wang & Ronald Bremer, 2011. "Order Imbalance and Intraday Price Discovery: Evidence from Chinese Stock Markets," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 14(04), pages 693-714.
    • Handle: RePEc:wsi:rpbfmp:v:14:y:2011:i:04:n:s0219091511500019
    DOI: 10.1142/S0219091511500019
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    Cited by:

    1. Chaiyuth Padungsaksawasdi & Ali Parhizgari, 2017. "Major Currency ETFs and Their Associated Spot and Futures Rates," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 20(04), pages 1-32, December.

    More about this item

    Keywords

    Price discovery; order imbalance; intraday volume; intraday volatility; Chinese stock markets;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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