Do order imbalances predict Chinese stock returns? New evidence from intraday data

Paresh Kumar Narayan, Seema Narayan, Joakim Westerlund

Research output: Contribution to journalArticleResearchpeer-review

33 Citations (Scopus)

Abstract

In this paper we examine whether order imbalances can predict the Chinese stock market returns. We use intraday data, a panel data predictive regression model that accounts for persistent and endogenous order imbalances and cross-sectional dependence in returns, and show that order imbalances predict stock returns from 1-minute trading to 90-minute trading. On the basis of this predictability evidence using multiple trading strategies we show that profits persist during the day. These results imply that a source of Chinese market inefficiency is order imbalances.

Original languageEnglish
Pages (from-to)136-151
Number of pages16
JournalPacific Basin Finance Journal
Volume34
DOIs
Publication statusPublished - Sep 2015
Externally publishedYes

Keywords

  • Intraday
  • Order imbalance
  • Panel data
  • Predictability
  • Stock returns
  • Trading strategies

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