An Empirical Analysis of the Shanghai and Shenzhen Limit Order Books
This paper investigates the market microstructure of the Shanghai and Shenzhen Stock Exchanges. 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 modeling 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 capitalization, tick frequencies, and turnover. Furthermore, we find that market impact is increasing in trade size. Order imbalances predict the next day's returns, with small order imbalances having a negative effect.
|Date of creation:||16 Jul 2013|
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- 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.
- Chunyang Zhou & Chongfeng Wu & Li Yang, 2011. "The Informational Role of Stock and Warrant Trades: Empirical Evidence from China," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 47(0), pages 78-93, January.
- Bruce Mizrach, 2008. "The next tick on Nasdaq," Quantitative Finance, Taylor & Francis Journals, vol. 8(1), pages 19-40.
- 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)
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