Publication Type

Conference Proceeding Article

Version

publishedVersion

Publication Date

4-2022

Abstract

We show that order flows do not exhibit predictive power on asset returns, and their relationships have been static over time. We use a reduced-rank regression formulation to model both returns and the order flows as endogenous variables, and use investors' sentiment and attention as exogenous factors. We provide empiricalevidence to demonstrate that cross-sectional commonality in attention (sentiment) is linearly (nonlinearly) associated with both returns and order flows at the intraday level, while the sentiment and attentionmeasures themselves exhibit a nonlinear mutual relationship, thus revealing the multi-dimensional aspect of the commonality relationship.

Keywords

commonality, return and order flow measures, co-movement, market sentiment, investor attention, principal component analyses, canonical correlation analyses, reduced rank regression, quantitative trading strategies.

Discipline

Finance | Finance and Financial Management

Research Areas

Finance

Publication

Proceedings of the 65th Meeting Euro Working Group for Commodities and Financial Modelling, New York, 2022 April 28-30

First Page

1

Last Page

76

Identifier

https://www.hofstra.edu/sites/default/files/2022-05/advances-since-financial-crisis-conference.pdf

City or Country

New York

Download

Share

COinS