Asymmetric relationship between order imbalance and realized volatility: Evidence from the Australian market

Bissoondoyal-Bheenick, E, Brooks, R and Do, H 2019, 'Asymmetric relationship between order imbalance and realized volatility: Evidence from the Australian market', International Review Of Economics and Finance, vol. 62, pp. 309-320.


Document type: Journal Article
Collection: Journal Articles

Title Asymmetric relationship between order imbalance and realized volatility: Evidence from the Australian market
Author(s) Bissoondoyal-Bheenick, E
Brooks, R
Do, H
Year 2019
Journal name International Review Of Economics and Finance
Volume number 62
Start page 309
End page 320
Total pages 12
Publisher Elsevier
Abstract This paper examines the effect of order imbalance on realized volatility in the Australian stock market for the period between August 2007 and May 2016. To analyse this asymmetric relationship, we decompose order imbalance into buyer- and seller-initiated trades and capture good and bad volatilities by using realized semivariances. We find that the effect of seller-/buyer-initiated trade on bad/good volatility is asymmetric. Specifically, the effect of seller-initiated trade on bad volatility is consistently larger than that of buyer-initiated trade on good volatility. On the other hand, while seller-initiated trade has no significant effect on good volatility, buyer-initiated trade has significantly reduced the bad volatility. We conclude that the number of trades and trade volume have an impact on realized volatility, irrespective of the components of realized volatility.
Subject Finance
Keyword(s) Order Imbalance
Realized Volatility
Realized Semivariances
Buyer versus Seller initiated trades
ASX50
DOI - identifier 10.1016/j.iref.2019.04.009
Copyright notice © 2019 Elsevier Inc. All rights reserved.
ISSN 1059-0560
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