Order-Flow and Return Correlation as a Stock Selection Factor
Summary
This research note describes a stock-selection factor built from the relationship between intraday changes in net buy orders and high-frequency returns. Net buy-order changes serve as a proxy for shifts in investor buying intent, while returns represent price movement. The factor’s sign helps distinguish falling stocks where buy orders rise, interpreted as stronger support, from falling stocks where buy orders also decline, interpreted as weaker support.
The reported tests show negative monthly IC and Rank IC, a monthly win rate above 70%, and a long-short return near 2.70%. The factor reportedly retains selection ability after orthogonalizing against lower- and higher-frequency factors, within CSI 300 and CSI 500 constituents, and under weekly or half-month rebalancing. The close-of-day version is highlighted after orthogonalization. These are historical research findings, not proof of future performance; the summary gives no sample dates, detailed transaction-cost treatment, or full methodology for evaluating implementation.
Key ideas
- The factor correlates intraday net buy-order changes with high-frequency stock returns.\nRising net buy orders during a price decline are interpreted as evidence of stronger investor support.\nThe note reports negative monthly IC and Rank IC, with a long-short return around 2.70%.\nThe close-of-day factor is reported to retain selection ability after orthogonalization.\nReported results cover Chinese large- and mid-cap universes and multiple rebalance intervals, but do not establish future performance.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.