Dynamic intraday relations between order imbalance, volatility and return of jump losers

摘要

This study adopted intraday return instead of daily return used by previous researches to examine the effect of order imbalance not only on the individual stock return but also volatility among jump losers. The study also built up order imbalance-based trading strategies to earn abnormal return. A contemporaneous order imbalance-return relation was examined by GARCH (1,1) model and time-series regression model. The data presented significantly positive relation in both models as previous studies on daily return. The study focused on the lagged effect of imbalance on return and found that such relation was negatively significant, while contemporaneous imbalance had positive significant impact on return. The study examined the volatility-order imbalance relationship by a time-varying GARCH (1,1) model. The positive relation of volatility and order imbalance was consistent with the ex-ante expectation that larger imbalance made return more volatile. The study developed two order imbalance-based trading strategies based on different definitions of price: trading price and bid-ask. Due to the characteristics of our jump losers, we used short selling strategy. The results showed the huge profitability of order imbalance strategies when we traded on extreme volume.