A Continuous-Time Measurement of the Buy-Sell Pressure in a Limit Order Book Market

University of Copenhagen Finance Working Paper No. 2004/03

38 Pages Posted: 14 Jun 2005

See all articles by Nikolaus Hautsch

Nikolaus Hautsch

University of Vienna - Department of Statistics and Operations Research

Tony Hall

Date Written: September 30, 2004

Abstract

In this paper, we investigate the buy and sell arrival process in a limit order book market. Using an intensity framework allows to estimate the simultaneous buy and sell intensity and to derive a continuous-time measure for the buy-sell pressure in the market. Based on limit order book data from the Australian Stock Exchange (ASX), we show that the buy-sell pressure is particularly influenced by recent market and limit orders and the current depth in the ask and bid queue. We find evidence for the hypothesis that traders use order book information in order to infer from the price setting behavior of market participants. Furthermore, our results indicate that the buy-sell pressure is clearly predictable and is a significant determinant of trade-to-trade returns and volatility.

Keywords: Buy and sell arrival process, order book information, market depth, bivariate

JEL Classification: G14, C32, C41

Suggested Citation

Hautsch, Nikolaus and Hall, Anthony D, A Continuous-Time Measurement of the Buy-Sell Pressure in a Limit Order Book Market (September 30, 2004). University of Copenhagen Finance Working Paper No. 2004/03, Available at SSRN: https://ssrn.com/abstract=741346 or http://dx.doi.org/10.2139/ssrn.741346

Nikolaus Hautsch (Contact Author)

University of Vienna - Department of Statistics and Operations Research ( email )

Kolingasse 14
Vienna, A-1090
Austria

No contact information is available for Anthony D Hall

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