Technical Analysis and the Timing Strategies of Liquidity Providers: Evidence from China’s A-Shares Stock Market

Conference paper
Part of the Lecture Notes in Electrical Engineering book series (LNEE, volume 185)

Abstract

Liquidity providers have to consider a tradeoff between executive risk and adverse selection risk. In this paper we empirically research whether resistance and support levels can help liquidity providers to construct timing strategies. Using Chinese stock market high-frequency transaction data, we investigate the relations between resistance (support) level and several liquidity indicators, and we find that resistance and support levels are positively related to peaks in depth on the limit order book, and the Granger causality tests suggest that a large number of orders clustering at some prices leads to the creation of the resistance (support) level. The empirical results indicate that resistance (support) level can help liquidity providers to construct timing strategies.

Keywords

Technical analysis Liquidity provision Timing strategies Limit order Book 

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Copyright information

© Springer-Verlag London 2013

Authors and Affiliations

  1. 1.School of Economics and ManagementUniversity of Electronic Science and Technology of ChinaChengduPeople’s of Republic. China

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