Price impact in equity auctions: zero, then linear

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. The linear part comes from fast traders, while the peak is due to slow traders. 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 because of the discrete nature of prices; this holds for surprisingly large orders 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 superlinear.