We study the \emph{multi-level order-flow imbalance (MLOFI)}, which measures the net flow of buy and sell orders at different price levels in a limit order book (LOB). Using a recent, high-quality data set for 6 liquid stocks on Nasdaq, we use Ridge regression to fit a simple, linear relationship between MLOFI and the contemporaneous change in mid-price. For all 6 stocks that we study, we find that the goodness-of-fit of the relationship improves with each additional price level that we include in the MLOFI vector. Our results underline how the complex order-flow activity deep into the LOB can influence the price-formation process.
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