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.
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© 2013 Springer-Verlag London
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Li, W., Wang, Z., Zeng, Y. (2013). Technical Analysis and the Timing Strategies of Liquidity Providers: Evidence from China’s A-Shares Stock Market. In: Xu, J., Yasinzai, M., Lev, B. (eds) Proceedings of the Sixth International Conference on Management Science and Engineering Management. Lecture Notes in Electrical Engineering, vol 185. Springer, London. https://doi.org/10.1007/978-1-4471-4600-1_44
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DOI: https://doi.org/10.1007/978-1-4471-4600-1_44
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