Returns and Order Flow Imbalances: Intraday Dynamics and Macroeconomic News Effects
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arXiv
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| Format: | Preprint |
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2025
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| _version_ | 1866914080061652992 |
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| author | Takahashi, Makoto |
| author_facet | Takahashi, Makoto |
| contents | We study the interaction between returns and order flow imbalances in the S&P 500 E-mini futures market using a structural VAR model identified through heteroskedasticity. The model is estimated at one-second frequency for each 15-minute interval, capturing both intraday variation and endogeneity due to time aggregation. We find that macroeconomic news announcements sharply reshape price-flow dynamics: price impact rises, flow impact declines, return volatility spikes, and flow volatility falls. Pooling across days, both price and flow impacts are significant at the one-second horizon, with estimates broadly consistent with stylized limit-order-book predictions. Impulse responses indicate that shocks dissipate almost entirely within a second. Structural parameters and volatilities also exhibit pronounced intraday variation tied to liquidity, trading intensity, and spreads. These results provide new evidence on high-frequency price formation and liquidity, highlighting the role of public information and order submission in shaping market quality. |
| format | Preprint |
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arxiv_https___arxiv_org_abs_2508_06788 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Returns and Order Flow Imbalances: Intraday Dynamics and Macroeconomic News Effects Takahashi, Makoto Trading and Market Microstructure Econometrics We study the interaction between returns and order flow imbalances in the S&P 500 E-mini futures market using a structural VAR model identified through heteroskedasticity. The model is estimated at one-second frequency for each 15-minute interval, capturing both intraday variation and endogeneity due to time aggregation. We find that macroeconomic news announcements sharply reshape price-flow dynamics: price impact rises, flow impact declines, return volatility spikes, and flow volatility falls. Pooling across days, both price and flow impacts are significant at the one-second horizon, with estimates broadly consistent with stylized limit-order-book predictions. Impulse responses indicate that shocks dissipate almost entirely within a second. Structural parameters and volatilities also exhibit pronounced intraday variation tied to liquidity, trading intensity, and spreads. These results provide new evidence on high-frequency price formation and liquidity, highlighting the role of public information and order submission in shaping market quality. |
| title | Returns and Order Flow Imbalances: Intraday Dynamics and Macroeconomic News Effects |
| topic | Trading and Market Microstructure Econometrics |
| url | https://arxiv.org/abs/2508.06788 |