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Price impact in equity auctions: zero, then linear

Author

Listed:
  • Mohammed Salek

    (CentraleSupélec, MICS - Mathématiques et Informatique pour la Complexité et les Systèmes - CentraleSupélec - Université Paris-Saclay)

  • Damien Challet

    (MICS - Mathématiques et Informatique pour la Complexité et les Systèmes - CentraleSupélec - Université Paris-Saclay)

  • Ioane Muni Toke

    (CentraleSupélec, MICS - Mathématiques et Informatique pour la Complexité et les Systèmes - CentraleSupélec - Université Paris-Saclay)

Abstract

Using high-quality data, we report several statistical regularities of equity auctions in the Paris stock exchange. First, the average order book density is linear around the auction price at the time of auction clearing and has a large peak at the auction price. While the peak is due to slow traders, the order density shape is the result of subtle dynamics. The impact of a new market order or cancellation at the auction time can be decomposed into three parts as a function of the size of the additional order: (1) zero impact, caused by the discrete nature of prices, sometimes up to a surprisingly large additional volume relative to the auction volume (2) linear impact for additional orders up to a large fraction of the auction volume (3) for even larger orders price impact is non-linear, frequently super-linear.

Suggested Citation

  • Mohammed Salek & Damien Challet & Ioane Muni Toke, 2024. "Price impact in equity auctions: zero, then linear," Post-Print hal-03938660, HAL.
  • Handle: RePEc:hal:journl:hal-03938660
    Note: View the original document on HAL open archive server: https://hal.science/hal-03938660v2
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    References listed on IDEAS

    as
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