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VPIN and the China¡¯s Circuit-Breaker

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  • Yameng Zheng

Abstract

The market microstructure theory and high-frequency trading analyze as quantitative investment¡¯s frontier and hot issue is popular in China in recent years, but China¡¯s stock index futures introduced later, so there are not much academic attention. This paper measures the probability of informed trading in China¡¯s stock index futures market by VPIN method. The empirical results show that the VPIN can not only monitor the probability of the informed trading market of IF 300, IH 50 and IC 500, but also play an early warning role before the ¡°circuit-breaker¡±. Tracking VPIN values allows the liquidity providers to control their position risk, and regulators can monitor the liquidity quality of the market, limit transactions in advance or tighten market controls.

Suggested Citation

  • Yameng Zheng, 2017. "VPIN and the China¡¯s Circuit-Breaker," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(12), pages 126-133, December.
    • Handle: RePEc:ibn:ijefaa:v:9:y:2017:i:12:p:126-133
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    References listed on IDEAS

    as
    1. David Easley & Marcos M. López de Prado & Maureen O'Hara, 2012. "Flow Toxicity and Liquidity in a High-frequency World," The Review of Financial Studies, Society for Financial Studies, vol. 25(5), pages 1457-1493.
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    More about this item

    Keywords

    market microstructure; high-frequency trading; VPIN; circuit-breaker; liquidity;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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