I propose a bagging tree framework to study the information content of the limit order book in U.S. equity market. By measuring the... Show moreI propose a bagging tree framework to study the information content of the limit order book in U.S. equity market. By measuring the predictability and profitability of the order book data up to 5 levels, I find that the limit orders book is informative. In addition to market orders, limit orders behind the best bid and ask prices also contributes to short-term future price movements. Finally, I design simple strategies to show that this information content can be effectively and consistently translated to economic value. My results may provide important implications for both researchers and market practitioners. Show less
