Order Flow Imbalance Effects on the German Stock Market

Business Research, December 2015, Volume 8, Issue 2, pp 213-238

Posted: 16 Mar 2013 Last revised: 19 Jan 2016

See all articles by Michael Hanke

Michael Hanke

University of Liechtenstein

Michael Weigerding

University of Liechtenstein; Commerzbank AG

Date Written: July 17, 2013

Abstract

Order flow imbalance refers to the difference between market buy and sell orders during a given period. This paper analyzes effects of order flow imbalance on returns of stocks traded on the German Xetra trading system on a daily basis. It is the first study examining this relation for the German stock market. In contrast to previous studies on other markets, we control for unobserved effects by 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. As a new contribution, we provide evidence for size and liquidity effects for the unconditional relation between order imbalance and returns.

Keywords: order imbalance

JEL Classification: G14

Suggested Citation

Hanke, Michael and Weigerding, Michael, Order Flow Imbalance Effects on the German Stock Market (July 17, 2013). Business Research, December 2015, Volume 8, Issue 2, pp 213-238, Available at SSRN: https://ssrn.com/abstract=2233974 or http://dx.doi.org/10.2139/ssrn.2233974

Michael Hanke (Contact Author)

University of Liechtenstein ( email )

Fuerst Franz Josef-Strasse
Vaduz, FL-9490
Liechtenstein

Michael Weigerding

University of Liechtenstein ( email )

F├╝rst-Franz-Josef-Strasse
Vaduz, FL-9490
Liechtenstein

Commerzbank AG ( email )

Frankfurt am Main, D - 60261
Germany

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