IDEAS home Printed from
   My bibliography  Save this paper

An Empirical Analysis of the Shanghai and Shenzen Limit Order Books


  • Huimin Chung
  • Jie Lu
  • Bruce Mizrach


This paper investigates the market microstructure of the Shanghai and Shenzhen Stock Ex- changes. The two major Chinese stock markets are pure order-driven trading mechanisms without market makers, and we analyze empirically both limit order books. We begin our empirical model- ing using the vector autoregressive model of Hasbrouck and extend the model to incorporate other information in the limit order book. We also study the market impact on A shares, B shares and H shares, and analyze how the market impact of stocks varies cross sectionally with market capital- ization, tick frequencies, and turnover. Furthermore, we distinguish the market impacts of small, average and block trades, and conclude that the market impacts of small trades are signi?cantly lower than those of other trades.

Suggested Citation

  • Huimin Chung & Jie Lu & Bruce Mizrach, 2009. "An Empirical Analysis of the Shanghai and Shenzen Limit Order Books," CQE Working Papers 0109, Center for Quantitative Economics (CQE), University of Muenster.
  • Handle: RePEc:cqe:wpaper:0109

    Download full text from publisher

    File URL:
    File Function: Version of September, 2009
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Ng, Lilian & Wu, Fei, 2007. "The trading behavior of institutions and individuals in Chinese equity markets," Journal of Banking & Finance, Elsevier, vol. 31(9), pages 2695-2710, September.
    2. Hasbrouck, Joel, 1991. " Measuring the Information Content of Stock Trades," Journal of Finance, American Finance Association, vol. 46(1), pages 179-207, March.
    3. Barclay, Michael J. & Warner, Jerold B., 1993. "Stealth trading and volatility : Which trades move prices?," Journal of Financial Economics, Elsevier, vol. 34(3), pages 281-305, December.
    4. Alfonso Dufour & Robert F. Engle, 2000. "Time and the Price Impact of a Trade," Journal of Finance, American Finance Association, vol. 55(6), pages 2467-2498, December.
    5. Shenoy, Catherine & Zhang, Ying Jenny, 2007. "Order imbalance and stock returns: Evidence from China," The Quarterly Review of Economics and Finance, Elsevier, vol. 47(5), pages 637-650, December.
    6. Xu, Cheng Kenneth, 2000. "The microstructure of the Chinese stock market," China Economic Review, Elsevier, vol. 11(1), pages 79-97.
    7. Cai, Bill M. & Cai, Charlie X. & Keasey, Kevin, 2006. "Which trades move prices in emerging markets?: Evidence from China's stock market," Pacific-Basin Finance Journal, Elsevier, vol. 14(5), pages 453-466, November.
    8. Soeren Hvidkjaer, 2008. "Small Trades and the Cross-Section of Stock Returns," Review of Financial Studies, Society for Financial Studies, vol. 21(3), pages 1123-1151, May.
    9. Chunyang Zhou & Chongfeng Wu & Li Yang, 2011. "The Informational Role of Stock and Warrant Trades: Empirical Evidence from China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(0), pages 78-93, January.
    10. Kalok Chan & Y. Peter Chung & Wai-Ming Fong, 2002. "The Informational Role of Stock and Option Volume," Review of Financial Studies, Society for Financial Studies, vol. 15(4), pages 1049-1075.
    11. Bruce Mizrach, 2008. "The next tick on Nasdaq," Quantitative Finance, Taylor & Francis Journals, vol. 8(1), pages 19-40.
    12. 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.
    13. Brad M. Barber & Yi-Tsung Lee & Yu-Jane Liu & Terrance Odean, 2009. "Just How Much Do Individual Investors Lose by Trading?," Review of Financial Studies, Society for Financial Studies, vol. 22(2), pages 609-632, February.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Chiarella, Carl & He, Xue-Zhong & Wei, Lijian, 2015. "Learning, information processing and order submission in limit order markets," Journal of Economic Dynamics and Control, Elsevier, vol. 61(C), pages 245-268.
    2. Westerlund, Joakim & Narayan, Paresh Kumar & Zheng, Xinwei, 2015. "Testing for stock return predictability in a large Chinese panel," Emerging Markets Review, Elsevier, vol. 24(C), pages 81-100.

    More about this item


    limit order book; Chinese stock market; microstructure; VAR model;

    JEL classification:

    • A - General Economics and Teaching

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cqe:wpaper:0109. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Susanne Deckwitz). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.