Browsing by Subject "Order imbalance"

Now showing 1 - 4 of 4

Open Access
Big data analytics, order imbalance and the predictability of stock returns
(Elsevier, 2021-09-24) Akyildirim, E.; Şensoy, Ahmet; Gulay, G.; Corbet, S.; Salari, Hajar Novin
Financial institutions have adopted big data to a considerable extent to provide better investment decisions. Consequently, high-frequency algorithmic traders use a vast amount of historical data with various statistical models to maximize their trading profits. Until recently, high-frequency algorithmic trading was the domain of institutional traders with access to supercomputers. Nowadays, any investor can potentially make high-frequency trades because of easy access to big data and software to analyze and execute trades. With that in mind, Borsa Istanbul introduced real time big data analytics as a product to its customers. These analytics are derived in real time from order book and trade data and aim to level the playing field between investment firms and retail traders. Using classical benchmark models in the literature, we show that Borsa Istanbul’s order imbalance-based data analytics are useful in predicting both time-series and cross-sectional intraday excess future returns, proving that this product is extremely beneficial to market participants, particularly day traders.
Open Access
Information content of order imbalance in the index options market
(Elsevier BV, 2021-12-12) Şensoy, Ahmet; Omole, John
We use proprietary transaction level data of Borsa Istanbul to compute the order imbalance of index options in order to investigate the linkages between option trades and spot index returns. Our findings show that weeks with higher call (put) order imbalance are associated with higher (lower) contemporaneous spot index returns. In addition, higher call order imbalance significantly predicts negative next-week index returns. The spot index return predictability by call options is absorbed neither by the stock order imbalance nor the index futures imbalance. Indeed, this predictability is consistent with the view that the hedging demand of counterparties in the option market that leads to the transfer of order imbalance from option market to stock market is the driver of predictability. Results are robust after controlling for various factors.
Open Access
Order imbalance and commonality: Evidence from the options market
(Borsa Istanbul Anonim Sirketi, 2022-01) Omole, John; Şensoy, Ahmet; Gulay, Guzhan
Using a market model and principal component analysis, we investigate the existence of common effects in order imbalance in the Borsa Istanbul's option market. Accordingly, we find the presence of commonality in order imbalance for call options and an even more dominant presence in put options. We investigate the impact of this commonality on the underlying equity market's price discovery; however, the results indicate no significant impact. Our results suggest that, from the order imbalance perspective, equity order imbalance contributes more than options to explaining stock return variations. © 2021 The Authors
Open Access
Three essays on derivatives markets
(2022-01) Omole, Oluwakayode John
This thesis comprises of three essays on derivatives markets. The first essay revisits the model-free methodology of the implied volatility index (VIX) and its global counterparts as empirically estimated. Then, we modify the model parameter selection procedure to be compatible with the microstructure characteristics of emerging derivative markets. Applying this approach on Turkish market data, we introduce the implied volatility index of Borsa Istanbul (VBI). We find that VBI is a significant predictor of the future realized volatility, is significantly correlated with Turkey’s own financial indicators, but not with many global financial indicators. Additionally, we find that the presence of implied volatility spillover from US equity market to Borsa Istanbul, but not the other way around. The second essay uses proprietary transaction level data of Borsa Istanbul to compute the order imbalance of index options to investigate the linkages between option trades and spot index returns. Our findings show that weeks with higher call (put) order imbalance are associated with higher (lower) contemporaneous spot index returns. In addition, higher call order imbalance significantly predicts negative next-week index returns. The result of the chapter is consistent with the view that the hedging demand of counterparties in the option market that leads to the transfer of order imbalance from option market to stock market drives the predictability of index call options. In the third essay, we investigate the existence of common effects in order imbalance in the Borsa Istanbul’s option market. Accordingly, we find the presence of commonality in order imbalance for call options and an even more dominant presence in put options. The results suggest that, from the order imbalance perspective, equity order imbalance contributes more than options to explaining stock return variations.