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High-frequency liquidity in the Chinese stock market: Measurements, patterns, and determinants
- We explore a broad range of high-frequency liquidity measures for the Chinese stock market, based on a comprehensive tick-level dataset for stocks on the Shenzhen Stock Exchange (SZSE) with approximately 46.64 billion events in 2019–2021. We integrate the raw event-level data into a granular and continuous limit order book for each stock for the three years. We summarize their liquidity levels and key distributional properties. Hypothesis tests show that order interarrival times follow Weibull—not exponential—distributions, implying that Poisson flow is not an appropriate model for order flow in the Chinese stock market. We analyze the intraday and cross-sectional patterns of liquidity, and find novel intraday periodicities in liquidity at whole-minute frequencies such as 1-minute, 5-minute, and 10-minute. Finally, we propose the aggressive–passive imbalance (API), analogous to the order flow imbalance of Cont, Kukanov, and Stoikov (2014), and develop an order-based model of the change in bid–ask spread that sheds light on the universal mechanism of spread formation with respect to order flows. To the best of our knowledge, this is by far the most comprehensive study of market liquidity for the Chinese stock market in the literature.
mRORAC: A stable and market adapted risk-adjusted performance measure for capital allocation
Research Field： This paper proposes the modified Return on Risk-Adjusted Capital (mRORAC), a stable alternative to traditional RORAC for divisional risk-adjusted performance evaluation. mRORAC allocates capital cost savings rather than the traditional cost employed in RORAC, ensures bounded fluctuations, preserves risk-return rankings, and maintains other important properties. Unlike RORAC’s reliance on exogenous hurdle rates, mRORAC aligns divisional metrics with market-implied risk pricing by endogenizing capital costs through a Capital Asset Pricing Model (CAPM) equilibrium framework, optimizing economic value added. This dual equilibrium tool bridges internal capital allocation with external market dynamics, offering robust solutions for institutions in volatile risk environments.
