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Liquidity dynamics around intraday price jumps in Chinese stock market

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Abstract

Using 4128 single jumps detected from high frequency data of 220 individual stocks in SZ300P index, this paper investigates the liquidity dynamics around price jumps in Chinese market. Some interesting empirical results are obtained and the corresponding explanations are given. The frequency of positive jumps is quite higher than that of negative jumps. The trading volumes and average trade sizes are all in a high level around positive jumps. The relatively low liquidities around negative jumps show that negative jumps may be generated and enlarged by poor liquidity provision. The price reversal after price jumps is significant, and price reversal lasts longer after positive jumps. Moreover, the size and direction of jumps are significantly correlated with the returns and trades in the post-jump trading time. These findings are believed to be associated with the high proportion of retail investors and their herding behavior for price trend chasing.

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Author information

Authors and Affiliations

  1. School of Finance, Zhejiang Gongshang University, Hangzhou, 310018, China

    Die Wan

  2. School of Management, University of Chinese Academy of Sciences, Beijing, 100190, China

    Xianhua Wei

  3. Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing, 100190, China

    Xiaoguang Yang

Authors
  1. Die Wan
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  2. Xianhua Wei
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  3. Xiaoguang Yang
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Corresponding author

Correspondence to Die Wan.

Additional information

This research was supported by the National Natural Science Foundation under Grant Nos. 71431008, 71532013, 71501170, and Zhejiang Provincial National Science Foundation under Grant No. LQ16G010001. The authors are also appreciated for the fund provided by Zhejiang Provincial Key Research Base for Humanities and Social Science Research (Applied Economics in Zhejiang Gongshang University).

This paper was recommended for publication by Editor ZHANG Xun.

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Wan, D., Wei, X. & Yang, X. Liquidity dynamics around intraday price jumps in Chinese stock market. J Syst Sci Complex 30, 434–463 (2017). https://doi.org/10.1007/s11424-016-5033-4

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  • DOI: https://doi.org/10.1007/s11424-016-5033-4

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