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Liquidity Dynamics Around Intraday Price Jumps in Chinese Stock Market

WAN Die1 ,WEI Xianhua 2, YANG Xiaoguang3   

  1. 1.School of Finance, Zhejiang Gongshang University, Hangzhou 310018, China.;2.School of Management, University of Chinese Academy of Sciences, Beijing 100190, China.;3.Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing 100190, China.
  • Online:2017-04-25 Published:2017-03-24

WAN Die,WEI Xianhua,YANG Xiaoguang. Liquidity Dynamics Around Intraday Price Jumps in Chinese Stock Market[J]. Journal of Systems Science and Complexity, 2017, 30(2): 434-463.

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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