An analysis of price impact functions of individual trades on the London stock exchange

Wilinski, Mateusz; Cui, Wei; Brabazon, Anthony; Hamill, Philip

doi:10.1080/14697688.2015.1071077

Cited by 10 publications

(12 citation statements)

References 38 publications

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“…Several studies have scrutinised components of price impact, where the latter includes both permanent and transient components, and comprehensive reviews are included in [1,7,8,23,26]. A reasonable point of departure is the identification of the following very general relation-ship [25]: price impact quantifies how a transaction of a given volume affects the price.…”

Section: Price Impactmentioning

confidence: 99%

“…With trade volumes increasing 10-fold in developed markets through the 1990's, it became possible to quantify regularities in price response to establish the relationship between averaged price shifts and transaction volumes [1,7,8,11,20,[23][24][25][26]28]. This has led to a more refined but heuristic definition of price impact as the correlation between trade size and direction and the resultant price change.…”

Section: Introductionmentioning

confidence: 99%

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Deviations in expected price impact for small transaction volumes under fee restructuring

Harvey

Hendricks

Gebbie

et al. 2017

Physica A: Statistical Mechanics and its Applications

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We report on the occurrence of an anomaly in the price impacts of small transaction volumes following a change in the fee structure of an electronic market. We first review evidence for the existence of a master curve for price impact on the Johannesburg Stock Exchange (JSE). On attempting to re-estimate a master curve after fee reductions, it is found that the price impact corresponding to smaller volume trades is greater than expected relative to prior estimates for a range of listed stocks. We show that a master curve for price impact can be found following rescaling by an appropriate liquidity proxy, providing a means for practitioners to approximate price impact curves without onerous processing of tick data.

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Section: Price Impactmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Deviations in expected price impact for small transaction volumes under fee restructuring

Harvey

Hendricks

Gebbie

et al. 2017

Physica A: Statistical Mechanics and its Applications

View full text Add to dashboard Cite

show abstract

“…Our model of price impact function is different from but complementary to the existing papers on price impact. For example, Wilinski et al (2015) empirically find that price impact exhibits a sub-linear power-law scaling of daily-normalized volume. In Bouchaud et al (2009), the theory of long-term resilience is put forth to model price impacts over different time lags.…”

Section: Introductionmentioning

confidence: 99%

Market Price of Trading Liquidity Risk and Market Depth

Kijima

Ting

2019

Int. J. Theor. Appl. Finan.

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Price impact of a trade is an important element in pre-trade and post-trade analyses. We introduce a framework to analyze the market price of liquidity risk, which allows us to derive an inhomogeneous Bernoulli ordinary differential equation. We obtain two closed form solutions, one of which reproduces the linear function of the order flow in Kyle (1985) for informed traders.However, when traders are not as asymmetrically informed, an S-shape function of the order flow is obtained. We perform an empirical intra-day analysis on Nikkei futures to quantify the price impact of order flow and compare our results with industry's heuristic price impact functions. Our model of order flow yields a rich framework for not only to estimate the liquidity risk parameters, but also to provide a plausible cause of why volatility and correlation are stochastic in nature. Finally, we find that the market depth encapsulates the market price of liquidity risk. 1 arXiv:1912.04565v1 [q-fin.TR]

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“…This paper investigates the distributional properties and long-memory of the bid-ask spread for high-frequency data from the Mercato dei Titoli di Stato (MTS) inter-dealer fixed-income securities platform for European sovereign bond markets from July 2005 to December 2011. 1 The prevalent bid-ask spread reflects the fundamental costs of immediate trading and the underlying liquidity for a particular asset which is an important metric in the market microstructure literature (Wilinski, Cui, Brabazon and Hamill, 2015). It is of central importance to market participants for a range of reasons.…”

Section: Introductionmentioning

confidence: 99%

Did long-memory of liquidity signal the European sovereign debt crisis?

Sun

Hamill

et al. 2018

Ann Oper Res

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This paper analyses high frequency MTS data to comprehensively evaluate the liquidity of the European sovereign bond markets before and during the European sovereign debt crisis for eleven countries. The Hill index, Generalized Hurst exponent and Dynamic Conditional Score (DCS) are employed to evaluate the properties of the bid-ask spread. Sovereign bonds exhibit the stylized facts reported for a range of financial markets. The 1-minute interval analysis indicates the level of bid-ask spread exhibits long-memory and the change in bid-ask spread experiences volatility clustering. Long-memory effects diminish (disappear) for 5-minute (15minute) interval, and for short-term maturity (peripheral countries) is stronger than long-term maturity (core countries). Analysis of sub-periods indicates that longmemory process reached its peak during European sovereign debt crisis from May 2010 to December 2011. This analysis suggests that estimating long-memory parameters for high-frequency data could be a useful tool to monitor market stability.

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An analysis of price impact functions of individual trades on the London stock exchange

Cited by 10 publications

References 38 publications

Deviations in expected price impact for small transaction volumes under fee restructuring

Deviations in expected price impact for small transaction volumes under fee restructuring

Market Price of Trading Liquidity Risk and Market Depth

Did long-memory of liquidity signal the European sovereign debt crisis?

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