Order Book Price Impact in the Chinese Soybean Futures Market

47 Pages Posted: 19 Feb 2021

See all articles by Muzhao Jin

Muzhao Jin

Queen's University Management School

Fearghal Kearney

Queen's Management School

Youwei Li

Hull University Business School

Yung Chiang Yang

University College Dublin (UCD) College of Business

Date Written: December 11, 2020

Abstract

We study the price impact of order flow in the world’s largest soybean meal futures markets. Our intraday results indicate that incoming orders can be used to explain price changes and to significantly predict future price changes. Our results are shown to be robust to various order flow measures, price aggregation approaches and data frequencies. We compare various order flow measures; finding that Order Flow Imbalance (OFI) is a more all-encompassing measure carrying greater information about price change relative to both Trade Imbalance (TI) and volume. Moreover, while both OFI and TI are shown to predict future price changes, this predictability diminishes over longer measure and price change frequency horizons.

Keywords: Order flow imbalance, Limit order book, Price impact, Futures markets

JEL Classification: G12, G13, G15

Suggested Citation

Jin, Muzhao and Kearney, Fearghal Joseph and Li, Youwei and Yang, Yung Chiang, Order Book Price Impact in the Chinese Soybean Futures Market (December 11, 2020). Available at SSRN: https://ssrn.com/abstract=3747306 or http://dx.doi.org/10.2139/ssrn.3747306

Muzhao Jin

Queen's University Management School ( email )

Riddel Hall
185 Stranmillis Road
Belfast, BT9 5EE
United Kingdom

Fearghal Joseph Kearney

Queen's Management School ( email )

Riddel Hall
Belfast, Northern Ireland BT9 5EE
Northern Ireland

Youwei Li (Contact Author)

Hull University Business School ( email )

University of Hull
Hull, HU6 7RX
United Kingdom

Yung Chiang Yang

University College Dublin (UCD) College of Business ( email )

Belfield
Dublin, 4
Ireland

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