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Slow Decay of Impact in Equity Markets: Insights from the ANcerno Database

Author

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  • Frédéric Bucci
  • Michael Benzaquen

    (LadHyX - Laboratoire d'hydrodynamique - X - École polytechnique - CNRS - Centre National de la Recherche Scientifique)

  • Fabrizio Lillo
  • Jean-Philippe Bouchaud

Abstract

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 as the metaorder ends:while at the end of the same day it is on average ≈ 2/3 of the peak impact, the decay continues the next days, following a power-law function at short time scales, and converges to a non-zero asymptotic value at long time scales (∼ 50 days) equal to ≈ 1/2 of the impact at the end of the first day. Due to a significant, multiday correlation of the sign of executed metaorders, a careful deconvolution of the observed impact must be performed to extract the estimate of the impact decay of isolated metaorders.

Suggested Citation

  • Frédéric Bucci & Michael Benzaquen & Fabrizio Lillo & Jean-Philippe Bouchaud, 2019. "Slow Decay of Impact in Equity Markets: Insights from the ANcerno Database," Post-Print hal-02323357, HAL.
    • Handle: RePEc:hal:journl:hal-02323357
    DOI: 10.1142/S2382626619500060
    Note: View the original document on HAL open archive server: https://hal.science/hal-02323357
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    References listed on IDEAS

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    Cited by:

    1. Fr'ed'eric Bucci & Iacopo Mastromatteo & Michael Benzaquen & Jean-Philippe Bouchaud, 2019. "Impact is not just volatility," Papers 1905.04569, arXiv.org.
    2. Florent Benaych-Georges & Jean-Philippe Bouchaud & Stefano Ciliberti, 2020. "Equity Factors: To Short Or Not To Short, That Is The Question," Papers 2003.10419, arXiv.org, revised Apr 2021.
    3. Johann Lussange & Boris Gutkin, 2023. "Order book regulatory impact on stock market quality: a multi-agent reinforcement learning perspective," Papers 2302.04184, arXiv.org.
    4. Frédéric Bucci & Iacopo Mastromatteo & Michael Benzaquen & Jean-Philippe Bouchaud, 2019. "Impact is not just volatility," Post-Print hal-02323182, HAL.
    5. Alessandro Micheli & Eyal Neuman, 2020. "Evidence of Crowding on Russell 3000 Reconstitution Events," Papers 2006.07456, arXiv.org, revised Sep 2022.

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