Since 2014
Understanding Order-Flow Volatility
The International Journal of Financial Management
View Archive Info| Field | Value | |
| Title |
Understanding Order-Flow Volatility
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| Creator |
Ravi, Rahul; Assistant Professor, Department of finance, John Molson School of Business, Concordia University, Canada. Email: rravi@jmsb.concordia.ca
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| Subject |
CAPM, Beta, Markowitz Mean-Variance Framework, Fama and French
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| Description |
Given that order-flow is likely to be driven by differences in investors’ beliefs, a reasonable hypothesis is that order-flow volatility should be positively related to the level of investor heterogeneity. Motivated by this hypothesis, this study investigates the association between order-flow variability and various known proxies of divergence of opinions and informational differences. We find order-flow variability to be positively associated with trading volume, dispersion in analysts’ forecasts and the S&P 500 futures open interest (a proxy for market-wide divergence of opinions), and negatively associated with the adverse selection cost of trading. We also demonstrate a positive relation between order-flow variability and risk-adjusted stock returns. In conclusion, we find evidence of co-movement in order-flow variability as well as in the adverse selection cost of trading and liquidity. Comovement in order-flow variability appears to partially explain co-movement in liquidity.
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| Publisher |
Publishing India Group
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| Date |
2015-07-15
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| Type |
info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion Peer-reviewed Article |
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| Format |
application/pdf
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| Identifier |
http://www.myresearchjournals.com/index.php/IJFM/article/view/3094
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| Source |
International Journal of Financial Management; Vol 4, No 2 (2014)
2229-5682 |
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| Language |
eng
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| Relation |
http://www.myresearchjournals.com/index.php/IJFM/article/view/3094/3022
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| Rights |
Copyright (c) International Journal of Financial Management |
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