2011 Fiscal Year Final Research Report
Informational efficiency and order imbalance in limit order markets
| Project/Area Number |
21530301
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| Research Category |
Grant-in-Aid for Scientific Research (C)
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| Allocation Type | Single-year Grants |
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| Section | 一般 |
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| Research Field |
Public finance/Monetary economics
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| Research Institution | Osaka University |
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Principal Investigator |
OHTA Wataru 大阪大学, 大学院・経済学研究科, 教授 (20293681)
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| Project Period (FY) |
2009 – 2011
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| Keywords | 証券取引 / 指値注文市場 / 情報効率性 / 注文不均衡 |
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| Research Abstract |
This study tests whether short-horizon future returns can be predicted from past order imbalance in limit order markets. The evidence from the Tokyo Stock Exchange shows that changes in quote mid-points over five-minute intervals can be inferred from lagged order imbalances. The degree of predictability depends on the states of the limit order book in patterns consistent with the crowding-out effects. However, trading strategies based on lagged order imbalances as well as the states of the book are not necessarily conducive to positive returns because bid-ask spreads are relatively wide, suggesting that the market is informationally efficient in the semi-strong form.
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