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Order Imbalances and Market Efficiency: Evidence from the Taiwan Stock Exchange

Lee, Yi-Tsung and Liu, Yu-Jane and Roll, Richard and Subrahmanyam, Avanidhar (2004) Order Imbalances and Market Efficiency: Evidence from the Taiwan Stock Exchange. Journal of Financial and Quantitative Analysis, 39 (2). pp. 327-341. ISSN 0022-1090. doi:10.1017/S0022109000003094. https://resolver.caltech.edu/CaltechAUTHORS:20190506-134646444

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Abstract

Data from the Taiwan Stock Exchange identify the originator of each submitted order, and there are no designated dealers or specialists. We study marketable order imbalances, i.e., the net order flow resulting from trades that demand immediacy. We distinguish imbalances by trader type (individuals, domestic institutions, foreign institutions) and by the usual size of each trader's order. Day-to-day persistence in order imbalance is strongest for small foreign institutions and weakest for large individual traders. Such persistence emanates both from splitting orders over time and from herding, and there is little evidence that aggregate price pressures from such persistence last beyond a trading day, indicating that de facto market making is quite effective. We attempt to discern which types of traders are de facto liquidity providers, which are likely to be informed, and which trade for liquidity reasons. The evidence indicates that all trader classes are successful market makers, large domestic institutions conduct the most informed trades, and large individuals are noise or liquidity traders.


Item Type:Article
Related URLs:
URLURL TypeDescription
https://doi.org/10.1017/S0022109000003094DOIArticle
https://www.jstor.org/stable/30031858JSTORArticle
Additional Information:© 2004 School of Business Administration, University of Washington. We thank an anonymous referee, Jonathan Karpoff (the editor), and Michael Brennan for valuable comments. Lee thanks the National Science Council of the Republic of China for financial support.
Funders:
Funding AgencyGrant Number
National Science Council (Taipei)UNSPECIFIED
Issue or Number:2
DOI:10.1017/S0022109000003094
Record Number:CaltechAUTHORS:20190506-134646444
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20190506-134646444
Official Citation:Lee, Y., Liu, Y., Roll, R., & Subrahmanyam, A. (2004). Order Imbalances and Market Efficiency: Evidence from the Taiwan Stock Exchange. Journal of Financial and Quantitative Analysis, 39(2), 327-341. doi:10.1017/S0022109000003094
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:95253
Collection:CaltechAUTHORS
Deposited By: Tony Diaz
Deposited On:06 May 2019 21:12
Last Modified:16 Nov 2021 17:11

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