Price-Volume Relation—A Time Varying Model with Censored and Camouflage Effects
Date Issued
2004
Date
2004
Author(s)
Lin, Ju-Ching
DOI
en-US
Abstract
In this article, we investigate contemporaneous and lag-one return-order imbalance relation for large trading of individual NASDAQ-100 stocks in bull, bear, and consolidation markets. We use 90 seconds order imbalances as our explanatory variable in GARCH (1, 1) model. The sample period is from Dec 2, 2002 to Jan 6, 2003.
We only focus on medium to large size order imbalances in order to minimize noise of small trades. We sum those medium trades within 4.5 minutes, and the summands and other small trades are thus censored. By summing these medium orders, we can recover information that camouflaged by informed traders.
The major findings in this study are as follows. There is a contemporaneous significant positive relation between stock returns and order imbalances of each individual stock no matter what market it is. While in lag-one period, more than 86% of the coefficients are negative; the positive relation continuation occurs more possibly in bull market, which means there might exists a return reversal in the next period.
We also find that the relation of contemporaneous coefficients and market capitalization is significantly negative. It implies that order imbalances have substantial impact on stock returns of smaller firms due to their severe information asymmetry.
Subjects
買賣超
設限資料
偽裝效果
Order Imbalance
Camouflage
Censored
Type
thesis
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