Journal article
Multi-level order-flow imbalance in a limit order book
- Abstract:
- We study the multi-level order-flow imbalance (MLOFI), which is a vector quantity that measures the net flow of buy and sell orders at different price levels in a limit order book (LOB). Using a recent, high-quality data set for six liquid stocks on Nasdaq, we fit a simple, linear relationship between MLOFI and the contemporaneous change in mid-price. For all six stocks that we study, we find that the out-of-sample goodness-of-fit of the relationship improves with each additional price level that we include in the MLOFI vector. Our results underline how order-flow activity deep into the LOB can influence the price-formation process.
- Publication status:
- Published
- Peer review status:
- Peer reviewed
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- Files:
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(Preview, Accepted manuscript, pdf, 466.4KB, Terms of use)
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- Publisher copy:
- 10.1142/S2382626619500114
Authors
- Publisher:
- World Scientific Publishing
- Journal:
- Market Microstructure and Liquidity More from this journal
- Volume:
- 4
- Issue:
- 3 and 4
- Article number:
- 1950011
- Publication date:
- 2020-01-08
- Acceptance date:
- 2019-10-28
- DOI:
- EISSN:
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2424-8037
- ISSN:
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2382-6266
- Language:
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English
- Keywords:
- Pubs id:
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pubs:1067618
- UUID:
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uuid:9b7d0422-4ef1-48e7-a2d4-4eaa8a0a7ec1
- Local pid:
-
pubs:1067618
- Source identifiers:
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1067618
- Deposit date:
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2019-10-29
- ARK identifier:
Terms of use
- Copyright holder:
- World Scientific Publishing Company
- Copyright date:
- 2020
- Rights statement:
- © 2020 World Scientific Publishing Company.
- Notes:
- This is the accepted manuscript version of the article. The final version is available online from World Scientific Publishing at: https://doi.org/10.1142/S2382626619500114
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