This paper proposes and motivates a dynamical model of the Chinese stock market based on a linear regression in a dual state space connected to the original state space of correlations between the volume-at-price buckets by a Fourier transform. We apply our model to the price migration of executed orders by the Chinese brokerages in 2009-2010. We use our brokerage tapes to conduct a natural experiment assuming that tapes correspond to randomly assigned, informed and uninformed traders  . We did not notice any spike of illiquidity transmitting from the US Flash Crash in May 2010 to trading in China.
This paper proposes and motivates a dynamical model of the Chinese stock market based on a linear regression in a dual state space connected to the original state space of correlations between the volume-at-price buckets by a Fourier transform. We apply our model to the price migration of executed orders by the Chinese brokerages in 2009-2010. Regulatory brokerage tapes were used to conduct a natural experiment assuming that tapes correspond to randomly assigned, informed and uninformed traders . Our analysis demonstrated that customers' orders were tightly correlated--in a highly nonlinear sense of the neural networks--with the Chinese market sentiment index, significantly correlated with the stock returns and exhibited no correlation with the bellwether bond of the Bank of China . We did not notice any spike of illiquidity transmitting from the US Flash Crash in May 2010 to trading in China.
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We use our brokerage tapes
Regulatory brokerage tapes were used
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. Our analysis demonstrated that customers' orders were tightly correlated--in a highly nonlinear sense of the neural networks--with the Chinese market sentiment index, significantly correlated with the stock returns and exhibited no correlation with the bellwether bond of the Bank of China