Does Order Flow Commonality Extend Across Trade Sizes and Securities?

22 Pages Posted: 19 Jun 2006

See all articles by J. Christopher Hughen

J. Christopher Hughen

University of Denver - Daniels College of Business

Cynthia G. McDonald

University of Missouri at Columbia - Department of Finance

Abstract

We examine commonality in order imbalances across different types of securities and find that the extent of commonality is greater than previously documented. Order imbalances in portfolios of small stocks, large stocks, and closed-end funds have explanatory power for other portfolio returns even in the presence of own order flow. Our analysis of order flow composition reveals commonality in small and medium trades, but not in large trades, across portfolios. The activity from small-size trades is systemic, but not generally associated with returns on other securities. Order imbalances from larger size trades provide more information relevant to stock prices.

Suggested Citation

Hughen, John Christopher and McDonald, Cynthia G., Does Order Flow Commonality Extend Across Trade Sizes and Securities?. Financial Management, Vol. 35, No. 1, Spring 2006, Available at SSRN: https://ssrn.com/abstract=909671

John Christopher Hughen (Contact Author)

University of Denver - Daniels College of Business ( email )

2101 S. University Blvd
Denver, CO 80208-8951
United States
303-803-6171 (Phone)

HOME PAGE: http://www.hughen.com

Cynthia G. McDonald

University of Missouri at Columbia - Department of Finance ( email )

120 Middlebush Hall
Columbia, MO 65211
United States
(573) 882-0638 (Phone)
(573) 884-6296 (Fax)

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