An Empirical And Theoretical Study Of Order Imbalance And Price Behavior

Asset price behavior is always the core field of financial market microstructure. Stock price of exchange-listed firm is influenced not only by some financial information but also by various"market information". Some of the information reflects the moving direction of price correctly while other information is artificial or mechanical"false information"which may be relative to"herding effect"or some special behavior of"liquidity trader".Market information is hard to distinguish directly by stock price movement. If there is a kind of index which can reflect this information, we can observe the process how information influences stock price.The article introduces and uses order imbalance to research into the long term and predictable influence to stock price behavior. Meanwhile we analyze this phenomenon using a theoretical model in asymmetric information theory framework. At last we make a prospect about the use of order imbalance.This paper consists of seven chapters:The chapter1 makes an introduction about the background. Chapter 2 introduces the concept of order imbalance and its statistics. Chapter 3 reviews market microstructure theory (the definition and history). Meanwhile we introduces a theoretical model called"order split model"to give a pointed interpretation of order imbalance phenomenon. Chapter 4 researches time series characteristic of order imbalance: long memory, which is a good preparation for price impact and volatility forecast. Chapter 5 researches into the order imbalance price impact effect both theoretically and empirically. Chapter 6 introduces the use of order imbalance in volatility forecast and VOID(the volume order imbalance strategy design). Chapter 7 which is a summary mainly points out the shortcomings of this paper and makes a prospect about the future research on order imbalance.