Multi-Level Order-Flow Imbalance in a Limit Order Book
2018 ◽
Vol 04
(03n04)
◽
pp. 1950011
Keyword(s):
Data Set
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We study the multi-level order-flow imbalance (MLOFI), which is a vector quantity that measures the net flow of buy and sell orders at different price levels in a limit order book (LOB). Using a recent, high-quality data set for six liquid stocks on Nasdaq, we fit a simple, linear relationship between MLOFI and the contemporaneous change in mid-price. For all six stocks that we study, we find that the out-of-sample goodness-of-fit of the relationship improves with each additional price level that we include in the MLOFI vector. Our results underline how order-flow activity deep into the LOB can influence the price-formation process.
Keyword(s):
1995 ◽
Vol 50
(5)
◽
pp. 1655-1689
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Keyword(s):
1999 ◽
Vol 9
(4)
◽
pp. 335-357
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