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Does Order Flow Commonality Extend Across Trade Sizes and Securities?
Author(s) -
Hughen J. Christopher,
McDonald Cynthia G.
Publication year - 2006
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/j.1755-053x.2006.tb00133.x
Subject(s) - explanatory power , portfolio , order (exchange) , stock (firearms) , economics , business , financial economics , monetary economics , econometrics , finance , geography , philosophy , archaeology , epistemology
We examine commonality in order imbalances across different types of securities and find that the extent of commonality is greater than previously documented. Order imbalances in portfolios of small stocks, large stocks, and closed‐end funds have explanatory power for other portfolio returns even in the presence of own order flow. Our analysis of order flow composition reveals commonality in small and medium trades, but not in large trades, across portfolios. The activity from small‐size trades is systemic, but not generally associated with returns on other securities. Order imbalances from larger size trades provide more information relevant to stock prices.