Advanced Search
MyIDEAS: Login to save this paper or follow this series

Determinants of immediate price impacts at the trade level in an emerging order-driven market

Contents:

Author Info

  • Wei-Xing Zhou

    (ECUST)

Registered author(s):

    Abstract

    The common wisdom argues that, in general, large trades cause large price changes, while small trades cause small price changes. However, for extremely large price changes, the trade size and news play a minor role, while the liquidity (especially price gaps on the limit order book) is a more influencing factor. Hence, there might be other influencing factors of immediate price impacts of trades. In this paper, through mechanical analysis of price variations before and after a trade of arbitrary size, we identify that the trade size, the bid-ask spread, the price gaps and the outstanding volumes at the bid and ask sides of the limit order book have impacts on the changes of prices. We propose two regression models to investigate the influences of these microscopic factors on the price impact of buyer-initiated partially filled trades, seller-initiated partially filled trades, buyer-initiated filled trades, and seller-initiated filled trades. We find that they have quantitatively similar explanation powers and these factors can account for up to 44% of the price impacts. Large trade sizes, wide bid-ask spreads, high liquidity at the same side and low liquidity at the opposite side will cause a large price impact. We also find that the liquidity at the opposite side has a more influencing impact than the liquidity at the same side. Our results shed new lights on the determinants of immediate price impacts.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://arxiv.org/pdf/1201.5448
    File Function: Latest version
    Download Restriction: no

    Bibliographic Info

    Paper provided by arXiv.org in its series Papers with number 1201.5448.

    as in new window
    Length:
    Date of creation: Jan 2012
    Date of revision:
    Publication status: Published in New Journal of Physics 14 (2), 023055 (2012)
    Handle: RePEc:arx:papers:1201.5448

    Contact details of provider:
    Web page: http://arxiv.org/

    Related research

    Keywords:

    This paper has been announced in the following NEP Reports:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Gao-Feng Gu & Xiong Xiong & Yong-Jie Zhang & Wei Chen & Wei Zhang & Wei-Xing Zhou, 2014. "Stylized facts of price gaps in limit order books: Evidence from Chinese stocks," Papers 1405.1247, arXiv.org.
    2. Jian Zhou & Gao-Feng Gu & Zhi-Qiang Jiang & Xiong Xiong & Wei Zhang & Wei-Xing Zhou, 2014. "Microscopic determinants of the weak-form efficiency of an artificial order-driven stock market," Papers 1404.1051, arXiv.org.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:arx:papers:1201.5448. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (arXiv administrators).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.