عدم تعادل سفارش، بازده بازار و اخبار اقتصاد کلان : مدارک و شواهد از نرخ بهره بازار سلف استرالیا

The relationship between order imbalance, market returns and macroeconomic news is examined in the context of the Australian interest rate futures market. Contemporaneous order imbalance exerts a significant impact on market returns in the expected direction i.e. excess buy (sell) orders drive up (down) prices. Order imbalances are related to past market returns with market participants acting in a contrarian manner across all products following market rallies. Nine major macroeconomic announcements are identified with order imbalance, and returns, reacting to such announcements in a manner that correctly reflects the news component. Following a scheduled macroeconomic announcement there is an increase in the level of information asymmetry within the interest rate futures market, demonstrated by an increased sensitivity to order flow. Finally, the pattern of order imbalance immediately prior to scheduled announcements suggests that there is no information leakage.

The relationship between trading activity and the returns of financial assets has been examined by an array of literature. Many early studies measure trading activity by volume. Foster and Viswanathan (1990), Hiemstra and Jones (1994) and Lo and Wang (2000) study the US equity market and find that volume is positively related to returns, and closely linked to liquidity. Bissoondoyal-Bheenick and Brooks (2010) and Hussain (2011) examine the relationship between trading volume and stock returns in Australian and Europe respectively. However, measuring trading activity by volume may create problems and may actually conceal information. Trading volume can be high either due to a preponderance of buyer-initiated or seller-initiated trades, or because there is a large amount of trading interest on a given day, which is evenly distributed between buyers and sellers, each possibility having implications for prices and liquidity. Order imbalance, defined as the difference between buyer-initiated and seller-initiated trades, is a measure of trading activity that has been suggested as been more informative than volume. The impact of order imbalance on returns and liquidity may be the result of information asymmetry, or inventory adjustment. Glosten and Milgrom (1985) and Kyle (1985) develop theoretical models which assume that the trades of market participants will reveal information to the market when they have private information about the value of an asset. In equilibrium, the sensitivity of prices, and prevailing liquidity, will depend on the level of information asymmetry. The inventory models of Stoll (1978) and Ho and Stoll (1983) provide an alternative explanation; a large order imbalance may exacerbate the inventory problem faced by market-makers who will respond by changing bid-ask spreads and amending price quotations. More extreme order imbalances should have a greater effect on prices and liquidity owing to the possibility of asymmetric information, and inventory adjustment problems. A number of articles have considered order imbalances around specific events; Blume et al. (1989) study order flow around the October 1987 crash and find a strong relation between order imbalances and stock price movements together with evidence of subsequent reversals, whilst Lee (1992) considers earnings announcements and find that good news triggers brief but intense buying pressure. Chan et al. (1999), Chan and Fong (2000), and Hasbrouck and Seppi (2001), study order imbalance in US equity markets over relatively short periods and find that there is a strong predictive ability for subsequent stock returns. Chordia et al. (2002) conducted the first extended study using order imbalance on NYSE stocks and found that order imbalances are strongly related to contemporaneous absolute returns, as well as past market returns, and that investors exhibit contrarian behaviour in aggregate. Order imbalance methodology has also been applied to the investigation of financial market reaction to macroeconomic data announcements. Evans and Lyons (2002) show that foreign exchange order flow predicts macroeconomic surprises. Green (2004) develops a structural model to examine the informational content of trading in the US Treasury market surrounding US macroeconomic announcements. Sensitivity of prices to order flow is lower than usual before announcements, which is consistent with no information leakage; following the announcements there is an increased sensitivity to order flow, suggesting the release of public information increases the level of information asymmetry. Pasquariello and Vega (2007) employ a parsimonious model of speculative trading to analyse the response of two-year, five-year, and ten-year US bond prices to order flow and macroeconomic news over the period 1992–2000 and find that unanticipated order flow has a significant impact on daily bond price changes, this effect is greater when the dispersion of beliefs among market participants is high. Brandt and Kavajecz (2004) and Brandt et al. (2006) examine price discovery in the US Treasury market, finding that order-flow drives price movements, accounting for up to 26% of the variation in yields on days without macroeconomic announcements. Green (2004) considers the impact of trading on the prices of five-year US Treasury notes around scheduled macroeconomic releases and finds a significant increase in the informational role of trading following economic announcements. This suggests the release of public information increases the level of information asymmetry; the effect is greater after announcements with a bigger surprise component and thus a larger initial price impact. Underwood (2009) looks at the cross-market relationship between equities and bonds and notes that aggregate order imbalances play a strong role in explaining returns. In addition to the research which has considered aspects of order-flow in response to macroeconomic announcements, other features of financial market price action have been examined. Andersson et al. (2006) examine German Bond Futures and find a spill-over effect whereby German bond markets respond more strongly to the surprise component in US macroeconomic releases than Euro-area releases. Intriguingly they also find that German employment data is consistently leaked prior to the official release. Kim and Nguyen (2008) examine the spill-over effects of US interest rate news on the Australian financial markets. Kuttner (2001) and Fatum and Scholnick (2008) find that asset returns and volatilities respond only to the surprise component in macroeconomic announcements. Fleming and Remolona (1997) find that the behaviour of the fixed-income market has a flavour of the month aspect in which different announcements are regarded as important in different periods. Whilst RBA monetary policy announcements are excluded from the analysis in this paper, it is important to note there is an extensive literature examining the effects of monetary policy announcements on financial markets. Cook and Hahn (1988) and Demiralp and Jorda (2004) find that changes in the Fed Funds target rate produces large movements in short-term rates, and smaller but significant movements in intermediate- and long-term rates. More recently, the impact of monetary policy announcements has been modelled as a two-factor model consisting of target and path surprises (Gürkaynak et al., 2005, Andersson, 2010 and Smales, 2012) and similarly Fleming and Piazzesi (2005) demonstrate that yield changes depend not only on the target surprise but also on the shape of the yield curve. The order imbalance methodology has received little application in the Australian financial markets, and in particular within the Fixed Income space. With the increasing size, and relevance, of the Australian financial markets there is need for additional research in this area. This paper has several key aims. Firstly, a variant of the Chordia et al. (2002) methodology is applied to Fixed Income markets for the first time in order to examine the relationship between order imbalance and contemporaneous price movements in the Australian interest rate futures markets. This analysis will also enable a deeper understanding of aggregate trading behaviour in Interest Rate futures markets. Secondly, the link between the absolute level of order imbalance and market liquidity will be examined. This is of particular importance to market participants who require a high level of liquidity in order to successfully execute trading strategies. Finally, there is an examination of the relationship between order flow and macroeconomic announcements. This is the first such study on a non-US market and as such contributes to the literature by seeking to confirm or refute whether the existing studies are applicable only to the US, or are more broadly applicable to international markets. The key findings are summarized as follows. Order imbalances are strongly related to contemporaneous returns even after considering aggregate market activity. Contemporaneous order imbalance exerts a significant impact on market returns in the expected direction i.e. excess buy (sell) orders drive up (down) prices. Order imbalances are related to past market returns and participants in the Australian interest rate futures market tend to be contrarian across all products following market rallies, but whereas investors in bond futures continue to sell following market declines, bank-bill investors remain contrarian. Nine major macroeconomic announcements are identified, and both order imbalance and returns react to such announcements in a manner that correctly reflects the news component. The reaction to macroeconomic news is also consistent with established research such that negative news has a greater impact than positive news. The impact of macroeconomic news on bond futures is greater than that for the shorter-term Bank Bill futures. Following a scheduled macroeconomic announcement there is an increase in the level of information asymmetry within the interest rate futures market, demonstrated by an increased sensitivity to order flow. Finally, the pattern of order imbalance prior to announcements suggests that there is no information leakage. The rest of this paper is organized as follows: Section 2 discusses the nature of the data used in this paper. Section 3 outlines the methodology employed in the analysis. Section 4 provides discussion on the results of the empirical investigation. Section 5 concludes the paper.

The relations between trading activity and market returns have been explored extensively, particularly with regards the US equity markets. Trading activity has typically been measured by volume, but more recent work (e.g. Spiegel and Subrahmanyam, 1995 and Chordia et al., 2002) suggests that the imbalance between buyer and seller initiated orders could be a powerful determinant of price movements beyond trading volume. Utilizing order imbalance methodology in the context of the Australian interest rate futures market provides key findings which have implications for market participants and the implementation of trading strategies. Order imbalances are strongly related to contemporaneous returns even after considering aggregate market activity. Contemporaneous order imbalance exerts a significant impact on market returns in the expected direction i.e. excess buy (sell) orders drive up (down) prices. However when predicting next period volatility aggregate volume disappears as a significant factor which suggests that order imbalance is a more informative measure. Order imbalances are related to past market returns. Participants in the Australian interest rate futures market tend to be consistently contrarian in nature following market rallies, but whereas investors in bond futures continue to sell following market declines, bank-bill investors remain contrarian. Scheduled macroeconomic data has a significant impact on order imbalance. Nine major macroeconomic announcements are identified. Order imbalance reacts swiftly to such announcements, and in a manner that correctly reflects the news component. The impact of macroeconomic news on bond futures is greater than that for the shorter-term Bank Bill futures. Longer-maturity bond futures are more strongly impacted by inflation news, whilst shorter-maturity futures react more robustly to news on economic growth. There is an increase in information asymmetry following macroeconomic announcements. Following a scheduled macroeconomic announcement there is an increase in the level of information asymmetry within the interest rate futures market demonstrated by an increased sensitivity to order flow. However, the pattern of order imbalance prior to announcements suggests that there is no information leakage. The relationship between trading activity and the return on financial assets provides a rich avenue for future work. Further work in this field could investigate the information leakages between different markets, both with markets of differing asset classes and on an international basis. In particular, the spill-over effects of macroeconomic announcements and the subsequent price discovery process are deserving of attention.