This paper solves explicitly a simple equilibrium model with liquidity risk. In our liquidityadjusted capital asset pricing model, a security s required return depends on its expected liquidity as well as on the covariances of its own return and liquidity with the market return and liquidity. In addition, a persistent negative shock to a security s liquidity results in low contemporaneous returns and high predicted future returns. The model provides a unified framework for understanding the various channels through which liquidity risk may affect asset prices. Our empirical results shed light on the total and relative economic significance of these channels and provide evidence of flight to liquidity. r 2005 Elsevier B.V. All rights reserved.

Market Liquidity: Asset Pricing with Liquidity Risk

This paper examine empirically the relation between trades and quote changes for stocks trades in order-driven marketEstimates for samples of Shanghai Stock Exchange and Shenzhen Stock Exchange issues suggest:the price impact of trades is positive and persistent,this means the information content of trades is substantial;Large trades convey more information than small trades;Information asymmetries are more significant for small firms

Measuring the Information Content of Stock Trades

Corporate Yield Spreads and Bond Liquidity

Order Imbalance, Liquidity, and Market Returns

................................................................................................................... ii Acknowledgements ................................................................................................. iv Research Thesis Submission ...................................................................................... v Table of

The role of trading intensity in duration modelling and price discovery : evidence from the European carbon market

Dufour and Engle (J. Finance (2000) 2467) find evidence of increased presence of informed traders when the NYSE markets are most active. No such evidence, however, can be found by Manganelli (J. Financial Markets (2005) 377) for the infrequently traded stocks. This article investigates the issue of informed trading and its relation to liquidity in Shanghai Stock Exchange. Consistent with the hypothesis that information-based trade exists for all stocks, our findings suggest an increased presence of informed trading in both liquid and illiquid stocks when markets are active. Moreover, for the actively traded stocks, our results support the price formation model of Foster and Viswanathan (Rev. Financial Studies (1990) 593) that activities of informed traders deter uninformed investors from trading, thereby reducing market liquidity.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1288219_code896753.pdf?abstractid=1084794&mirid=1

Informed Trading and Liquidity in the Shanghai Stock Exchange

Informed trading and liquidity in the Shanghai Stock Exchange

This paper examines the within-market and cross-market information content of order flow for stocks, corporate bonds and Treasury bonds in China. With daily-aggregated tick-by-tick data over three years on the Shanghai Security Exchange, we find negative cross-asset effects of order flow on returns, both between stocks and bonds and between corporate and Treasury bonds. Our results provide evidence that not only cross-market portfolio rebalancing under general market conditions, but also flight-to-quality, which occurs particularly under extreme market conditions, are responsible for the cross-market effects of order flow. In particular, while Treasury bonds play a dominant role in stock-bond portfolio rebalancing, corporate bonds can replace Treasury bonds as a safe “haven” during extreme stock market conditions or during a fall in Treasury bond market returns.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1628020_code849351.pdf?abstractid=1628020

Information Content of Order Flow and Cross-Market Portfolio Rebalancing: Evidence for the Chinese Stock, Treasury and Corporate Bond Markets

Dufour and Engle (J. Finance (2000) 2467) find evidence of an increased presence of informed traders when the NYSE markets are most active. No such evidence, however, can be found by Manganelli (J. Financial Markets (2005) 377) for the infrequently traded stocks. In this paper, we fit a nonlinear log-ACD model to stocks listed on Shanghai Stock Exchange. When trading volume is high, empirical findings suggest presence of informed trading in both liquid and illiquid stocks. When volume is low, market activity is likely due to liquidity trading. Finally, for the actively traded stocks, our results support the price formation model of Foster and Viswanathan (Rev. Financial Studies (1990) 593).

https://www.econstor.eu/bitstream/10419/65796/1/574273077.pdf

Nonlinear ACD model and informed trading: evidence from Shanghai stock exchange

This paper examines the within-market and cross-market information content of order flow for stocks, corporate bonds and Treasury bonds in China. With daily-aggregated tick-by-tick data over three years on the Shanghai Security Exchange, we find negative cross-asset effects of order flow on returns, both between stocks and bonds and between corporate and Treasury bonds. Our results provide evidence that not only cross-market portfolio rebalancing under general market conditions, but also flight-to-quality, which occurs particularly under extreme market conditions, are responsible for the cross-market effects of order flow. In particular, while Treasury bonds play a dominant role in stock-bond portfolio rebalancing, corporate bonds can replace Treasury bonds as a safe i§haveni¨ during extreme stock market conditions or during a fall in Treasury bond market returns.

/pdf/information-content-of-order-flow-and-cross-market-portfolio-4hpwadzglf.pdf

Dijun Tan

Papers

Informed Trading and Liquidity in the Shanghai Stock Exchange

Informed trading and liquidity in the Shanghai Stock Exchange

Information Content of Order Flow and Cross-Market Portfolio Rebalancing: Evidence for the Chinese Stock, Treasury and Corporate Bond Markets

Nonlinear ACD model and informed trading: evidence from Shanghai stock exchange

Information Content of Order Flow and Cross-market Portfolio Rebalancing: Evidence for the Chinese Stock, Treasury and Corporate Bond Markets