Abstract
This article examines the information content of order imbalance (OIB), using 195 most active stocks from the National Stock Exchange of India. The private information of order flow has a persistent impact on prices, and makes the short-term returns predictable. The predictability appears strong for the first five minutes, and perishes within thirty minutes. Furthermore, the information inherent in the order flow impacts the deeper levels of limit-order book, indicating the presence of informed traders beyond the best quotes. Overall, the results support the information asymmetry hypothesis for the pure order-driven market of India.
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