High-frequency liquidity in the Chinese stock market: Measurements, patterns, and determinants

IF 4.8 2区经济学 Q1 BUSINESS, FINANCE

Pacific-Basin Finance Journal Pub Date : 2025-01-22 DOI:10.1016/j.pacfin.2025.102681

Chaoyi Zhao , Yufan Chen , Lintong Wu , Yuehao Dai , Ermo Chen , Lan Wu , Ruixun Zhang

{"title":"High-frequency liquidity in the Chinese stock market: Measurements, patterns, and determinants","authors":"Chaoyi Zhao , Yufan Chen , Lintong Wu , Yuehao Dai , Ermo Chen , Lan Wu , Ruixun Zhang","doi":"10.1016/j.pacfin.2025.102681","DOIUrl":null,"url":null,"abstract":"<div><div>We explore a broad range of high-frequency liquidity measures for the Chinese stock market, based on a comprehensive tick-level dataset for stocks on the Shenzhen Stock Exchange (SZSE) with approximately 46.64 billion events in 2019–2021. We integrate the raw event-level data into a granular and continuous limit order book for each stock for the three years. We summarize their liquidity levels and key distributional properties. Hypothesis tests show that order interarrival times follow Weibull—not exponential—distributions, implying that Poisson flow is not an appropriate model for order flow in the Chinese stock market. We analyze the intraday and cross-sectional patterns of liquidity, and find novel intraday periodicities in liquidity at whole-minute frequencies such as 1-minute, 5-minute, and 10-minute. Finally, we propose the <em>aggressive–passive imbalance</em> (API), analogous to the order flow imbalance of Cont, Kukanov, and Stoikov (2014), and develop an order-based model of the change in bid–ask spread that sheds light on the universal mechanism of spread formation with respect to order flows. To the best of our knowledge, this is by far the most comprehensive study of market liquidity for the Chinese stock market in the literature.</div></div>","PeriodicalId":48074,"journal":{"name":"Pacific-Basin Finance Journal","volume":"90 ","pages":"Article 102681"},"PeriodicalIF":4.8000,"publicationDate":"2025-01-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Pacific-Basin Finance Journal","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0927538X25000186","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}

引用次数: 0

Abstract

We explore a broad range of high-frequency liquidity measures for the Chinese stock market, based on a comprehensive tick-level dataset for stocks on the Shenzhen Stock Exchange (SZSE) with approximately 46.64 billion events in 2019–2021. We integrate the raw event-level data into a granular and continuous limit order book for each stock for the three years. We summarize their liquidity levels and key distributional properties. Hypothesis tests show that order interarrival times follow Weibull—not exponential—distributions, implying that Poisson flow is not an appropriate model for order flow in the Chinese stock market. We analyze the intraday and cross-sectional patterns of liquidity, and find novel intraday periodicities in liquidity at whole-minute frequencies such as 1-minute, 5-minute, and 10-minute. Finally, we propose the aggressive–passive imbalance (API), analogous to the order flow imbalance of Cont, Kukanov, and Stoikov (2014), and develop an order-based model of the change in bid–ask spread that sheds light on the universal mechanism of spread formation with respect to order flows. To the best of our knowledge, this is by far the most comprehensive study of market liquidity for the Chinese stock market in the literature.

查看原文本刊更多论文

求助全文

约1分钟内获得全文求助全文

来源期刊

Pacific-Basin Finance Journal BUSINESS, FINANCE-

CiteScore

6.80

自引率

6.50%

发文量

157

期刊介绍： The Pacific-Basin Finance Journal is aimed at providing a specialized forum for the publication of academic research on capital markets of the Asia-Pacific countries. Primary emphasis will be placed on the highest quality empirical and theoretical research in the following areas: • Market Micro-structure; • Investment and Portfolio Management; • Theories of Market Equilibrium; • Valuation of Financial and Real Assets; • Behavior of Asset Prices in Financial Sectors; • Normative Theory of Financial Management; • Capital Markets of Development; • Market Mechanisms.