| סיכום: | The time proximity of high-frequency trades can contain a salient signal. In this paper, we propose a
method to classify every trade, based on its proximity with other trades in the market within a short
period of time, into five types. By means of a suitably defined normalized order imbalance associated
to each type of trade, which we denote as conditional order imbalance (COI), we investigate the price
impact of the decomposed trade flows. Our empirical findings indicate strong positive correlations
between contemporaneous returns and COIs. In terms of predictability, we document that associations
with future returns are positive for COIs of trades which are isolated from trades of stocks other than
themselves, and negative otherwise. Furthermore, trading strategies which we develop using COIs
achieve conspicuous returns and Sharpe ratios, in an extensive experimental setup on a universe of 457
stocks using daily data for a period of four years.
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