The Price Impact of Order Book Events from a Dimension of Time | Zendy

Wentao Chi | Zendy; Xuemei Zhao | Zendy; Lufei Huang | Zendy

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The Price Impact of Order Book Events from a Dimension of Time

Author(s) -

Wentao Chi,

Xuemei Zhao,

Lufei Huang

Publication year - 2021

Publication title -

scientific programming

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.269

H-Index - 36

eISSN - 1875-919X

pISSN - 1058-9244

DOI - 10.1155/2021/9949565

Subject(s) - market liquidity , econometrics , market microstructure , order (exchange) , financial economics , economics , stock market , bid price , order book , explanatory power , dimension (graph theory) , limit (mathematics) , mainland china , market depth , monetary economics , mathematics , economy , geography , finance , philosophy , epistemology , mathematical analysis , context (archaeology) , archaeology , pure mathematics , china

We propose a new linear model to explain the price move by Level-2 high-frequency data in Chinese mainland stock market. In Chinese stock market, the cancellation ratio is very low, and imbalanced order flow prevails most of the time in the trading periods. From time dimension viewpoint, we find the difference of efficiency of limit orders executed, respectively, in bid/ask limit order book, order execution imbalance (OEI), could improve the classic model of Cont et al. (2014) based on market microstructure of Chinese mainland stock market. In particular, when market’s liquidity is booming, our model’s explanatory power and R-squared increased sharply. And the correlations of OEI are very high that may be exploited to predict the price move in the next time window for doing high-frequency trading.

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