Related papers: Slow decay of impact in equity markets
We develop a theory for the market impact of large trading orders, which we call metaorders because they are typically split into small pieces and executed incrementally. Market impact is empirically observed to be a concave function of…
We analyze a proprietary dataset of trades by a single asset manager, comparing their price impact with that of the trades of the rest of the market. In the context of a linear propagator model we find no significant difference between the…
This paper is devoted to the important yet little explored subject of the market impact of limit orders. Our analysis is based on a proprietary database of metaorders - large orders that are split into smaller pieces before being sent to…
We present an empirical study of price reversion after the executed metaorders. We use a data set with more than 8 million metaorders executed by institutional investors in the US equity market. We show that relaxation takes place as soon…
The article is an empirical study of market impact through order book events. It describes a mechanism of extracting an average participation rate and a market impact of small orders which represent individual slices of large metaorders.…
Our goal in this paper is to study the market impact in a market in which the order flow is autocorrelated. We build a model which explains qualitatively and quantitatively the empirical facts observed so far concerning market impact. We…
The available liquidity at any time in financial markets falls largely short of the typical size of the orders that institutional investors would trade. In order to reduce the impact on prices due to the execution of large orders, traders…
It is known that the impact of transactions on stock price (market impact) is a concave function of the size of the order, but there exists little quantitative theory that suggests why this is so. I develop a quantitative theory for the…
We study the market impact of a meta-order in the framework of the Minority Game. This amounts to studying the response of the market when introducing a trader who buys or sells a fixed amount h for a finite time T. This perturbation…
In this paper, we use a database of around 400,000 metaorders issued by investors and electronically traded on European markets in 2010 in order to study market impact at different scales. At the intraday scale we confirm a square root…
We propose a theory of the market impact of metaorders based on a coarse-grained approach where the microscopic details of supply and demand is replaced by a single parameter $\rho \in [0,+\infty]$ shaping the supply-demand equilibrium and…
In this work, we aim to reconcile several apparently contradictory observations in market microstructure: is the famous "square-root law" of metaorder impact, which decays with time, compatible with the random-walk nature of prices and the…
This paper is devoted to the important yet unexplored subject of crowding effects on market impact, that we call "co-impact". Our analysis is based on a large database of metaorders by institutional investors in the U.S. equity market. We…
While the market impact of aggressive orders has been extensively studied, the impact of passive orders, those executed through limit orders, remains less understood. The goal of this paper is to investigate passive market impact by…
This article provides a simple explanation of the asymptotic concavity of the price impact of a meta-order via the microstructural properties of the market. This explanation is made more precise by a model in which the local relationship…
We propose a minimal theory of non-linear price impact based on a linear (latent) order book approximation, inspired by diffusion-reaction models and general arguments. Our framework allows one to compute the average price trajectory in the…
This paper deals with a fundamental subject that has seldom been addressed in recent years, that of market impact in the options market. Our analysis is based on a proprietary database of metaorders-large orders that are split into smaller…
While the long-ranged correlation of market orders and their impact on prices has been relatively well studied in the literature, the corresponding studies of limit orders and cancellations are scarce. We provide here an empirical study of…
In this paper, we assume that the permanent market impact of metaorders is linear and that the price is a martingale. Those two hypotheses enable us to derive the evolution of the price from the dynamics of the flow of market orders. For…
Estimating market impact and transaction costs of large trades (metaorders) is a very important topic in finance. However, using models of price and trade based on public market data provide average price trajectories which are…