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Keywords:

  • order imbalance;
  • momentum;
  • underreaction
  • G12;
  • G14

Abstract

We propose that price-order-imbalance momentum strategies will produce outcomes that are more profitable for investors than price momentum strategies in the very short term. Adopting order imbalances information, investors themselves may employ untraded order data or exhibit herding behavior following others’ investing decisions related to order imbalance. Taiwan stock market investors have easy access to order imbalance information. This suggests that, in this emerging market, a strategy considering order imbalance may be more descriptive of investor behavior than a price momentum strategy.