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In this paper, we study the relation between order imbalances (buyer versus seller-initiated trades measured by a buy ratio) at an early trading hour and intraday price discovery in the Chinese stock markets. We find that the volatility of order imbalances is the highest around the open. There is strong evidence that order imbalances in the early trading hours have significant predictive power to intraday price discovery. The intraday returns of the high buy-ratio quintiles are significantly higher than those of the low buy-ratio ones. The evidence indicates that the information incorporated in early trading signals the intraday price discovery, and the information around the open dominates that revealed over the rest of the trading day.

In this paper we show that informational and real frictions in CDS markets strongly affect CDS premia. We derive this main finding using a proprietary set of individual CDS transactions cleared by the Depository Trust & Clearing Corporation. We first show that CDS traders adjust the CDS premium in response to the observed order flow. Buy orders lead to an increase of the premium and sell orders to a decrease, suggesting that the order flow carries information. Second, we show that traders adjust the premium more for transactions with higher inventory risk. Third, trading with buy-side investors who presumably have less market power increases this effect. Overall, our results imply that CDS premia contain a significant non-default related component which CDS traders charge to protect themselves against informational and real frictions.