Order Book Net Buy Factors for Chinese Stock Selection
Summary
This research note examines whether order book data can add stock selection information beyond factors derived from executed trades. It proposes three measures based on changes in net buy orders: the average rate of change, its volatility, and its skewness. The tests described use intraday windows, especially the first 30 minutes after the open, and evaluate monthly relative stock returns. Higher average net buying and higher skewness in the opening window are associated with stronger future relative returns. Volatility also shows selection power across many windows, with the strongest reported results after the midday open; the period before the close is an exception.
The note reports that each factor adds value when separately added to a traditional multi-factor model, though skewness adds little once average net buying and volatility are included. Results vary by market capitalization, order book depth, and rebalancing frequency: average net buying performs better among mid- and large-cap stocks, while volatility and skewness are weaker there. These are backtest findings, not guarantees, and the summary provides no detailed sample, costs, or robustness statistics.
Key ideas
- Intraday order book changes can provide stock selection signals beyond trade-based technical factors.
- Higher average net buy change in the first 30 minutes is associated with better future relative returns.
- Net buy change volatility and skewness show selection value, but performance varies by intraday window.
- Order book factors can add information to a traditional multi-factor model, though their incremental contributions overlap.
- Factor performance depends on market capitalization, order book depth, and rebalancing frequency.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.