Order flow imbalance effects on the German stock market

Order flow imbalance refers to the difference between market buy and sell orders during a given period. This paper is the first study to examine effects of order flow imbalance on returns of stocks traded on the German Xetra trading system on a daily basis. In contrast to previous studies on other m...

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Bibliographic Details
Published in:Business Research 2015-12, Vol.8 (2), p.213-238
Main Authors: Hanke, Michael, Weigerding, Michael
Format: Article
Language:English
Subjects:
Accounting/Auditing
Adverse selection
Business and Management
Business Strategy/Leadership
Corporate Finance
Inventory
Market prices
Marketing
Order imbalance
Original Research
Panel regression
Return predictability
Securities markets
Stock exchanges
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Summary:Order flow imbalance refers to the difference between market buy and sell orders during a given period. This paper is the first study to examine effects of order flow imbalance on returns of stocks traded on the German Xetra trading system on a daily basis. In contrast to previous studies on other markets, we control for unobserved effects using a fixed-effects panel regression. For the concurrent (or conditional) relation between order imbalance and returns, our results confirm those of the literature. For the question of return predictability from past order imbalances (unconditional relation), our results are partly confirmatory. In addition, we provide evidence for size and liquidity effects and analyze changes in imbalance effects during the financial crisis.
ISSN:2198-2627
2198-3402
1866-8658
2198-2627
DOI:10.1007/s40685-015-0025-0