Does the open limit order book reveal information about short-run stock price movements?
2006 (English)In: Umeå economic studies, ISSN 1403-4824, no 687Article in journal (Refereed) Published
This paper empirically tests whether an open limit order book contains informationabout future short-run stock price movements. To account for the discrete natureof price changes, the integer-valued autoregressive model of order one is utilized. Amodel transformation has an advantage over conventional count data approachessince it handles negative integer-valued price changes. The empirical results revealthat measures capturing offered quantities of a share at the best bid- and ask-pricereveal more information about future short-run price movements than measurescapturing the quantities offered at prices below and above. Imbalance and changesin offered quantities at prices below and above the best bid- and ask-price do,however, have a small and significant effect on future price changes. The resultsalso indicate that the value of order book information is short-term.
Place, publisher, year, edition, pages
Umeå: Department of Economics, Umeå University , 2006. no 687
Negative integer-valued data, time series, INAR, finance, stock price, open limit order book
Economics and Business
IdentifiersURN: urn:nbn:se:umu:diva-5235OAI: oai:DiVA.org:umu-5235DiVA: diva2:144686