Empirical regularities of order placement in the Chinese stock market

TL;DR

This paper analyzes high-frequency order placement data from Chinese stocks, revealing consistent distribution patterns, asymmetries between buyer and seller behaviors, and independence from market volatility, aiding in behavioral modeling.

Contribution

It provides detailed empirical regularities of order placement in Chinese stocks across different trading periods, highlighting asymmetries and independence from certain market variables.

Findings

Distributions of relative prices are similar across trading periods.

Order placement behavior is asymmetric between buyers and sellers.

Conditional distributions are independent of bid-ask spread and volatility.

Abstract

Using ultra-high-frequency data extracted from the order flows of 23 stocks traded on the Shenzhen Stock Exchange, we study the empirical regularities of order placement in the opening call auction, cool period and continuous auction. The distributions of relative logarithmic prices against reference prices in the three time periods are qualitatively the same with quantitative discrepancies. The order placement behavior is asymmetric between buyers and sellers and between the inside-the-book orders and outside-the-book orders. In addition, the conditional distributions of relative prices in the continuous auction are independent of the bid-ask spread and volatility. These findings are crucial to build an empirical behavioral microscopic model based on order flows for Chinese stocks.