We empirically study the market impact of trading orders. We are specifically interested in large trading orders that are executed incrementally, which we call hidden orders. These are statistically reconstructed based on information about market member codes using data from the Spanish Stock Market and the London Stock Exchange. We find that market impact is strongly concave, approximately increasing as the square root of order size. Furthermore, as a given order is executed, the impact grows in time according to a power law; after the order is finished, it reverts to a level of about 0.5–0.7 of its value at its peak. We observe that hidden orders are executed at a rate that more or less matches trading in the overall market, except for small deviations at the beginning and end of the order.

Moro, E., Vicente, J., Moyano, L.G., Gerig, A., Farmer, J.D., Vaglica, G., et al. (2009). Market impact and trading profile of hidden orders in stock markets. PHYSICAL REVIEW. E, STATISTICAL, NONLINEAR AND SOFT MATTER PHYSICS, 2009 [10.1103/PhysRevE.80.066102].

Market impact and trading profile of hidden orders in stock markets

VAGLICA, Gabriella;LILLO, Fabrizio;MANTEGNA, Rosario Nunzio
2009-01-01

Abstract

We empirically study the market impact of trading orders. We are specifically interested in large trading orders that are executed incrementally, which we call hidden orders. These are statistically reconstructed based on information about market member codes using data from the Spanish Stock Market and the London Stock Exchange. We find that market impact is strongly concave, approximately increasing as the square root of order size. Furthermore, as a given order is executed, the impact grows in time according to a power law; after the order is finished, it reverts to a level of about 0.5–0.7 of its value at its peak. We observe that hidden orders are executed at a rate that more or less matches trading in the overall market, except for small deviations at the beginning and end of the order.
2009
Moro, E., Vicente, J., Moyano, L.G., Gerig, A., Farmer, J.D., Vaglica, G., et al. (2009). Market impact and trading profile of hidden orders in stock markets. PHYSICAL REVIEW. E, STATISTICAL, NONLINEAR AND SOFT MATTER PHYSICS, 2009 [10.1103/PhysRevE.80.066102].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10447/45473
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