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Table 1. Order Imbalance Descriptive Statistics.
Daily marketable limit order imbalances on the TWSE (Taiwan Stock Exchange) were computed from September 1996 through April 1999 inclusive, 703 days, for the thirty largest stocks. Order imbalance was defined as buy orders less sell orders during the day (using marketable limit orders). Imbalances were tabulated separately for individuals, domestic and foreign institutions. In addition, traders were classified as large or small by tracing their order sizes during the entire sample period. A large trader had to place orders of at least ten lots more than 50% of the time. Summary measures are obtained by averaging individual stocks using market capitalization weights from the end of the previous calendar month. Means, medians, and standard deviations (STD) are computed over the entire sample.
Total Individuals Domestic Institutions
Foreign
Institutions Total Individuals Domestic Institutions
Foreign Institutions
Large Traders Small Traders
Number of orders
Mean -24 -22 -2 0 -63 -66 -3 6
Median -28 -26 -2 0 -64 -66 -2 1
STD 89 86 4 2 376 388 4 27
Shares (lots)
Mean -554 -458 -99 3 -417 -349 -104 36
Median -697 -561 -118 -2 -420 -342 -105 0
STD 3120 2780 448 109 1215 891 427 622
Table 2. Serial Correlation of Returns and Order Imbalances.
Serial correlations (up to six lags) were computed for order imbalances and daily returns. Daily order imbalances on the TWSE (Taiwan Stock Exchange) were computed from September 1996 through April 1999 inclusive, 703 days, for the thirty largest stocks. Order imbalance was defined as buy orders less sell orders during the day (using marketable limit orders). Imbalances were tabulated separately for individuals, domestic and foreign institutions. In addition, traders were classified as large or small by tracing their order sizes during the entire sample period. A large trader had to place orders of at least ten lots more than 50% of the time. Summary measures are obtained by averaging individual stock coefficients using market capitalization weights from the end of the previous calendar month. Significance levels of 0.1, 0.05 and 0.01 are indicated by *, ** and ***, respectively. The Ljung and Box (1978) Q test is for the null hypothesis that all six coefficients are zero.
1 0.040 0.041 0.176*** 0.126*** 0.331*** 0.355*** 0.265*** 0.542*** 0.041 2 0.076** 0.081** 0.050 0.166*** 0.156*** 0.178*** 0.106*** 0.527*** 0.005 3 0.129*** 0.138*** 0.020 0.108*** 0.181*** 0.199*** -0.023 0.438*** 0.045 4 0.013 0.022 -0.057 0.047 0.105*** 0.123*** 0.022 0.437*** -.0670*
5 0.101*** 0.106*** -0.026 0.086** 0.042 0.057 -0.001 0.365*** -0.041 6 0.080** 0.083** -0.014 0.030 0.052 0.070* -0.056 0.372*** 0.018 Q test 28*** 32*** 25*** 46*** 127*** 154*** 59*** 860***
Shares (Lots)
1 0.046 0.025 0.197*** 0.089** 0.152*** 0.085** 0.213*** 0.557***
2 0.053 0.064* 0.044 0.074* 0.074* 0.027 0.127*** 0.426***
Table 3: The Sources of Persistence In Imbalances
Daily order imbalances (OIB) on the Taiwan Stock Exchange were computed as in Table 1. Panel A below provides comparisons of daily autocorrelations with and without trades by the same traders.
Panel B tests if these autocorrelations are significantly different from zero. Significance of 0.1, 0.05 and 0.01 are indicated by *, ** and ***, respectively.
Panel A. Autocorrelations (one-day lag),
OIB in shares including and excluding the same traders on day t and day t-1
Large Small Including same traders 0.025 0.197*** 0.089** 0.085** 0.213*** 0.557***
Excluding same traders 0.029 0.123*** -0.008 -0.030 0.134*** 0.355***
Panel B. Wald tests for the difference between own OIB autocorrelations with and without the same traders on day t and day t-1
Large Small p-value 0.791 0.313 0.091 0.043 0.203 0.000
Table 4. Determinants of Order Imbalances.
Daily order imbalances by trader category, as described in Tables 1 and 2, are regressed here on day-of-the-week dummies, lagged imbalances of the same trader category, and past positive and negative market returns. Since the TWSE trades on Saturday, six lags and dummies span one week. WDj is a day-of-the-week dummy with Saturday as the base case, (i.e., j=1,…,5 denotes Monday,…,Friday.) The order imbalance (OIBt) is in shares (lots) and is value-weighted across the thirty largest stocks t days prior to the observation date. All OIB variables are scaled by the average absolute imbalance level of the class. MAXRt=max(0,Rt) and MINRt=min(0,Rt) where Rt is the value-weighted average return for the thirty stocks t days prior to the observation date. Value weights are based on market capitalization at the end of the previous month. Significance levels of 0.1, 0.05 and 0.01 are denoted by *, ** and
***, respectively. The R-square is adjusted for degrees of freedom.
Total Individuals Domestic OIB1 0.002 0.001 0.057*** 0.116 0.014*** 0.020*** 0.054*** 0.110***
OIB2 0.002 0.004 -0.005 0.111 0.002 0.000 0.023 0.027** R-Square 0.016 0.015 0.061 0.009 0.042 0.032 0.084 0.355
Table 5. Determinants of Returns.
The dependent variable is the daily value-weighted average return, Rt, for the thirty largest stocks on the Taiwan Stock Exchange. Explanatory variables include lagged positive and negative daily order imbalances and lagged positive and negative value-weighted average returns. Separate regressions are presented using the order imbalances of large and small traders. Traders were classified as large or small by tracing their order sizes during the entire sample period. A large trader had to place orders of at least ten lots more than 50% of the time. Order imbalances (OIB) are in shares (lots); and are value-weighted daily averages. EBO1=max(0,OIB1) and ESO1 =-min(0,OIB1) one day prior to the observation date. Similarly, MAXR1=max(0,R1) and MINR1=min(0,R1). To make the coefficients more readable, Rt is multiplied by 10,000. Significance levels of 0.1, 0.05 and 0.01 are denoted by *, **, and ***, respectively. The R-square is adjusted for degrees of freedom.
Total Individuals Domestic Institutions
Foreign
Institutions Total Individuals Domestic Institutions
Foreign Institutions
Large Traders Small Traders
Intercept -2.41 40.2 -1250. -702. -433. -1048. -811. -670.
EBO1 0.044 0.067 3.97 9.25 1.69* 1.13 5.64*** 2.94**
ESO1 0.338 0.451 -4.40* -16.3 -0.104 -1.68 -1.83 0.592 MINR1 -0.081 -0.089 0.01 -0.013 -0.030 0.01 -0.024 -0.045
MAXR1 0.093 0.089 0.09 0.094 0.063 0.10 0.077 0.080
R-Square -0.001 -0.001 0.00 0.003 0.002 0.00 0.008 0.005
Table 6. Price Impact of trades
The proportional price change from one call auction to the next is regressed on the total signed dollar accumulated order size between auctions, for each class of trader. Separate regressions for each trader type pool all orders submitted by that type in all stocks. Panel A presents the basic regression results, while Panel B tests for differences in the coefficients across trader types using an F-test. Significance at the 0.1, 0.05 and 0.01 level is indicated by *, ** and ***, respectively.
Panel A: Price Impact Coefficients
Coefficient t-statistic Adjusted R2 Coefficient t-statistic Adjusted R2 Coefficient t-statistic Adjusted R2
Individuals Domestic Institutions Foreign Institutions Marketable limit orders Panel B: Differences in Price Impact across trader types (Column less Row Coefficient)
Large Traders Small Traders
Institutions -0.369*** -0.356*** 2.656*** 4.003***
Small Traders
Foreign
Institutions -5.247*** -5.234*** -2.222*** -0.875*** -4.878***
Non-marketable limit orders
Institutions 0.301** -2.997*** -3.713*** -1.01***
Small Traders
Foreign
Institutions 6.877*** 3.579*** 2.863*** 5.566*** 6.576***
Panel C: Difference in price impact between marketable and non-marketable orders in Panel A Large Traders Small Traders 15.25*** 18.56*** 22.29*** 20.93*** 15.92*** 27.37***
Table 7. Contemporaneous correlations between marketable and non-marketable limit orders.
Daily cross-correlations were computed for marketable and non-marketable limit orders. Marketable limit orders are defined as orders placed at the prevailing inside quotes; i.e., sell orders placed at or below the highest prevailing bid or buy orders placed at or above the lowest prevailing offer. The number of marketable limit orders as a percentage of all orders is reported below for each trader category.
Significance levels of 0.1, 0.05 and 0.01 are indicated by *, ** and ***, respectively.
Marketable Individuals 0.107*** -0.081** -0.083** -0.017 -0.181*** -0.230***
Domestic
Institutions 0.074* 0.225*** -0.082** -0.119*** -0.123*** -0.198***
Large Traders
Foreign
Institutions 0.142*** 0.129*** 0.386*** -0.013 0.077** 0.167***
Individuals -0.424*** -0.512*** -0.242*** -0.094** -0.442*** -0.462***
Domestic
Institutions 0.140*** 0.228*** 0.039 0.095** 0.610*** -0.007 Non
Marketable
Small Traders
Foreign
Institutions 0.225*** 0.203*** 0.148*** -0.106*** 0.184*** 0.687***
Table 8. Proportion of Marketable Limit Orders
Marketable limit orders are defined as orders placed at the prevailing inside quotes; i.e., sell orders placed at or below the highest prevailing bid or buy orders placed at or above the lowest prevailing offer. The number of marketable limit orders as a percentage of all orders is reported below for each trader category. Significance levels of 0.1, 0.05 and 0.01 are indicated by *, **
and ***, respectively, for a test of the hypothesis that the relevant proportion is significantly different from 0.5.
Individuals Domestic Institutio6801 Tm(tio)Tj10.02 340e7201 c70.0015 Tc 0 Tw 10.10
Table 9. Trading Profits by Trader Category
.
Realized profits, defined as 100[net sales revenue/gross purchase cost-1], were tabulated from executed orders involving the thirty largest stocks. Profits were calculated only for shares acquired by open market purchase or equity offering within the sample period. A sale was excluded if there was no recorded purchase prior to the sale date. Similarly, purchases still held at the end of the sample were excluded. Separate transactions initiated by the same order were aggregated. Profits are net of expenses, which on the TWSE include a commission of 0.1425% for each trade and a transaction tax of 0.3% on the gross dollar amount of each sale. Adjustments are made for all stock dividends; (there are no splits in Taiwan.) Cash dividends are included in gross revenue without discounting or reinvestment. Panel A gives profits by category. Means and median returns were calculated from trader returns pooled across all stocks.6 Tests for medians are based on signed rank tests. Significance levels of 0.1, 0.05 and 0.01 are indicated by *, ** and ***, respectively.
Large Small Large Small Large Small Individuals Domestic Institutions Foreign Institutions
Panel A-1. Average Returns by Category For Non-Marketable Orders Pooled Trader Mean Return
3.016*** 3.612*** 4.250*** 4.782*** 6.698*** 6.584***
Pooled Trader Median Return
1.783*** 2.383*** 2.475*** 2.203*** 1.675*** -2.534
Panel A-2. Average Returns by Category For Marketable Orders Pooled Trader Mean Return
-0.024** 0.305*** 2.171*** 2.601*** 0.801 3.214***
Pooled Trader Median Return
-0.180*** 0.078*** 0.884*** 0.266** -1.465*** -3.331***
Panel A-3. Difference of Average Returns between Non-Marketable Orders and Marketable Orders Pooled Trader Mean Return (t-test)
3.040*** 3.307*** 2.079*** 2.181*** 5.897*** 3.370***
Pooled Trader Median Return (Wilcoxon test)
1.963*** 2.306*** 1.591*** 1.937*** 3.141*** 0.798**
6 For example, let Rj,k denote the return (%) earned by trader j in stock k and let Nk denote the number of traders of a given type for stock k, (k=1,…,30.) Then the Mean of Individual Stock Means is
∑ ∑
= =
1 . There can be a difference when the number of traders differs
across stocks.