Scandinavian Working Papers in Economics

Umeå Economic Studies,
Umeå University, Department of Economics

No 687: Does the Open Limit Order Book Reveal Information About Short-run Stock Price Movements?

Jörgen Hellström () and Ola Simonsen ()
Additional contact information
Jörgen Hellström: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden
Ola Simonsen: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden

Abstract: This paper empirically tests whether an open limit order book contains information about future short-run stock price movements. To account for the discrete nature of price changes, the integer-valued autoregressive model of order one is utilized. A model transformation has an advantage over conventional count data approaches since it handles negative integer-valued price changes. The empirical results reveal that measures capturing offered quantities of a share at the best bid- and ask-price reveal more information about future short-run price movements than measures capturing the quantities offered at prices below and above. Imbalance and changes in offered quantities at prices below and above the best bid- and ask-price do, however, have a small and significant effect on future price changes. The results also indicate that the value of order book information is short-term.

Keywords: Negative integer-valued data; time series; INAR; finance; stock price; open limit order book

JEL-codes: C25; G12; G14

26 pages, August 24, 2006

Full text files 

DownloadAsset.action...Id=3&assetKey=ues687 PDF-file

Download statistics

Questions (including download problems) about the papers in this series should be directed to David Skog ()
Report other problems with accessing this service to Sune Karlsson ().

RePEc:hhs:umnees:0687This page generated on 2024-09-13 22:17:26.