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More statistical properties of order books and price impact

  • Marc Potters

    (Science & Finance, Capital Fund Management)

  • Jean-Philippe Bouchaud

    (Science & Finance, Capital Fund Management
    CEA Saclay;)

We investigate present some new statistical properties of order books. We analyse data from the Nasdaq and investigate (a) the statistics of incoming limit order prices, (b) the shape of the average order book, and (c) the typical life time of a limit order as a function of the distance from the best price. We also determine the `price impact' function using French and British stocks, and find a logarithmic, rather than a power-law, dependence of the price response on the volume. The weak time dependence of the response function shows that the impact is, surprisingly, quasi-permanent, and suggests that trading itself is interpreted by the market as new information.

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Paper provided by Science & Finance, Capital Fund Management in its series Science & Finance (CFM) working paper archive with number 0210710.

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Date of creation: Oct 2002
Date of revision:
Publication status: Published in Physica A 324 (1-2) 133-140 (2003)
Handle: RePEc:sfi:sfiwpa:0210710
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  1. Willmann, R.D & Sch├╝tz, G.M & Challet, D, 2002. "Exact Hurst exponent and crossover behavior in a limit order market model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 316(1), pages 430-440.
  2. Eric Smith & J. Doyne Farmer & Laszlo Gillemot & Supriya Krishnamurthy, 2002. "Statistical theory of the continuous double auction," Papers cond-mat/0210475,
  3. Jean-Philippe Bouchaud & Marc Mezard & Marc Potters, 2002. "Statistical properties of stock order books: empirical results and models," Quantitative Finance, Taylor & Francis Journals, vol. 2(4), pages 251-256.
  4. R. Cont, 2001. "Empirical properties of asset returns: stylized facts and statistical issues," Quantitative Finance, Taylor & Francis Journals, vol. 1(2), pages 223-236.
  5. Jean-Philippe Bouchaud & Rama Cont, 1998. "A Langevin approach to stock market fluctuations and crashes," Science & Finance (CFM) working paper archive 500027, Science & Finance, Capital Fund Management.
  6. Bak, P. & Paczuski, M. & Shubik, M., 1997. "Price variations in a stock market with many agents," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 246(3), pages 430-453.
  7. Frantisek Slanina, 2001. "Mean-field approximation for a limit order driven market model," Papers cond-mat/0104547,, revised Aug 2001.
  8. Challet, Damien & Stinchcombe, Robin, 2001. "Analyzing and modeling 1+1d markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 300(1), pages 285-299.
  9. Biais, Bruno & Hillion, Pierre & Spatt, Chester, 1995. " An Empirical Analysis of the Limit Order Book and the Order Flow in the Paris Bourse," Journal of Finance, American Finance Association, vol. 50(5), pages 1655-89, December.
  10. Jean-Philippe Bouchaud & Marc Mezard & Marc Potters, 2002. "Statistical properties of stock order books: empirical results and models," Science & Finance (CFM) working paper archive 0203511, Science & Finance, Capital Fund Management.
  11. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
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