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Slow decay of impact in equity markets

Author

Listed:
  • X. Brokmann
  • E. Serie
  • J. Kockelkoren
  • J. -P. Bouchaud

Abstract

Using a proprietary dataset of meta-orders and prediction signals, and assuming a quasi-linear impact model, we deconvolve market impact from past correlated trades and a predictable return component to elicit the temporal dependence of the market impact of a single daily meta-order, over a ten day horizon in various equity markets. We find that the impact of single meta-orders is to a first approximation universal and slowly decays to zero (or to a small value), possibly as a power-law. We show that auto-correlated order-flows and trade information contents fully accounts for the apparent plateau observed in the raw data. We discuss the possible bias introduced by the quasi-linear assumption.

Suggested Citation

  • X. Brokmann & E. Serie & J. Kockelkoren & J. -P. Bouchaud, 2014. "Slow decay of impact in equity markets," Papers 1407.3390, arXiv.org.
    • Handle: RePEc:arx:papers:1407.3390
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    Citations

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    Cited by:

    1. Miko{l}aj Bi'nkowski & Charles-Albert Lehalle, 2018. "Endogeneous Dynamics of Intraday Liquidity," Papers 1811.03766, arXiv.org.
    2. N. Baradel & Bruno Bouchard & N. m. Dang, 2016. "Optimal Trading with Online Parameter Revisions," Post-Print hal-01590602, HAL.
    3. Emmanuel Bacry & Adrian Iuga & Matthieu Lasnier & Charles-Albert Lehalle, 2014. "Market impacts and the life cycle of investors orders," Papers 1412.0217, arXiv.org, revised Dec 2014.
    4. N Baradel & Bruno Bouchard & Ngoc Minh Dang, 2016. "Optimal trading with online parameters revisions," Post-Print hal-01304019, HAL.
    5. Jonathan Donier & Jean-Philippe Bouchaud, 2015. "Why Do Markets Crash? Bitcoin Data Offers Unprecedented Insights," Post-Print hal-01277584, HAL.
    6. M. Abeille & E. Serie & A. Lazaric & X. Brokmann, 2016. "LQG for portfolio optimization," Papers 1611.00997, arXiv.org, revised Nov 2016.
    7. J. Donier & J. Bonart & I. Mastromatteo & J.-P. Bouchaud, 2015. "A fully consistent, minimal model for non-linear market impact," Quantitative Finance, Taylor & Francis Journals, vol. 15(7), pages 1109-1121, July.
    8. Pierre Cardaliaguet & Charles-Albert Lehalle, 2016. "Mean Field Game of Controls and An Application To Trade Crowding," Papers 1610.09904, arXiv.org, revised Sep 2017.
    9. N Baradel & B Bouchard & Ngoc Minh Dang, 2016. "Optimal trading with online parameters revisions," Papers 1604.06342, arXiv.org.
    10. N Baradel & B Bouchard & Ngoc Minh Dang, 2016. "Optimal trading with online parameters revisions," Working Papers hal-01304019, HAL.
    11. Jonathan Donier & Jean-Philippe Bouchaud, 2015. "Why Do Markets Crash? Bitcoin Data Offers Unprecedented Insights," PLOS ONE, Public Library of Science, vol. 10(10), pages 1-11, October.
    12. Jonathan Donier & Julius Bonart, 2014. "A Million Metaorder Analysis of Market Impact on the Bitcoin," Papers 1412.4503, arXiv.org, revised Sep 2015.
    13. Elia Zarinelli & Michele Treccani & J. Doyne Farmer & Fabrizio Lillo, 2014. "Beyond the square root: Evidence for logarithmic dependence of market impact on size and participation rate," Papers 1412.2152, arXiv.org.
    14. Olivier Guéant, 2016. "The Financial Mathematics of Market Liquidity: From Optimal Execution to Market Making," Post-Print hal-01393136, HAL.

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