Order imbalance

Order imbalance

Orders of one kind for a stock not offset by the opposite orders, which causes a wide spread between bid and offer prices.

Imbalance of Orders

The excess of buy orders or sell orders for a given security. That is, an imbalance of orders occurs when more brokers or investors have made more orders of one type such that they cannot be matched to orders of the opposite type. Order imbalance in either direction reduces the liquidity of a security and thus specialists and market makers attempt to keep imbalance at the lowest possible level. Extreme order imbalance may result in the temporary suspension of trade.

order imbalance

An excess of buy or sell orders such that it is impossible to match one type of order with its opposite. Order imbalances usually occur after unexpected news causes a rush to buy or sell a security. In extreme cases, an order imbalance may cause suspension of trading in a security for a limited time. Also called imbalance of orders.

Order imbalance.

An order imbalance occurs when there are substantially more buy orders in a particular security than there are sell orders, or the reverse. The result is a wide spread between bid and ask prices.

A specialist on an exchange floor might ease a minor imbalance by purchasing shares if there was not enough demand or selling shares if there was more demand than supply.

Major imbalances typically result in a suspension of trading until the situation that caused the imbalance is resolved. Either very good or very bad news about a company may trigger an imbalance.

References in periodicals archive ?
the critical value x will be higher ([x.sup.2,DP] > [x.sup.1,DP]), more investors will follow the delay purchase strategy, and the order imbalance on the ex date from these investors will be larger.
Section II defines the measurement of order imbalance and presents our empirical findings.
They argue that an order imbalance in response to the call announcement leads to a temporary price decline, which is followed by a price rebound.
A convenient summary statistic for this order imbalance is the order flow ratio used by Lease, Masulis, and Page |32~.
Order imbalance is known to affect stock returns (Chordia, Roll, and Subrahmanyam, 2002; Chordia and Subrahmanyam, 2004).
In contrast with previous work such as Ederington and Lee (2002), these papers go beyond the simple analysis of return patterns to assess the possibility of leakage by taking into account order imbalance as a symptom of informed trading.
"There is going to be a gigantic order imbalance when they (markets) restart.
Chan et al (2005) also use transaction data and not only find evidence of the magnet effect on the KLSE, but also explicitly test how the magnet effect occurs through order imbalance (1).
Nevertheless, the rumors sent Seagram's stock price up $2.62 to $40.12, amidst trading so heavy that the stock was temporarily halted while an order imbalance was cleared.
Rather, it varies depending upon the time of day, order price and size, market congestion, trader type, firm size, order imbalance, and technology used for submitting an order.
The investigations in this paper focus on the effects of quote competition on the order imbalance. The reason to examine order imbalance is simple.
For example, Hopewell and Schwartz (1976, 1978) conclude that suspensions are (1) usually associated with a permanent change in price in response to the news and order imbalance, and (2) suspensions allow wide price changes in the context of the specialist maintaining an orderly market.