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Market Impact: A Systematic Study of Limit Orders

Author

Listed:
  • Emilio Said

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

  • Ahmed Bel Hadj Ayed

    (BNP-Paribas)

  • Alexandre Husson

    (BNP-Paribas)

  • Frédéric Abergel

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

Abstract

This paper is devoted to the important yet little explored subject of the market impact of limit orders. Our analysis is based on a proprietary database of metaorders - large orders that are split into smaller pieces before being sent to the market. We first address the case of aggressive limit orders and then, that of passive limit orders. In both cases, we provide empirical evidence of a power law behaviour for the temporary market impact. The relaxation of the price following the end of the metaorder is also studied, and the long-term impact is shown to stabilize at a level of approximately two-thirds of the maximum impact. Finally, a fair pricing condition during the life cycle of the metaorders is empirically validated.

Suggested Citation

  • Emilio Said & Ahmed Bel Hadj Ayed & Alexandre Husson & Frédéric Abergel, 2018. "Market Impact: A Systematic Study of Limit Orders," Post-Print hal-01561128, HAL.
    • Handle: RePEc:hal:journl:hal-01561128
    DOI: 10.1142/S2382626618500089
    Note: View the original document on HAL open archive server: https://hal.science/hal-01561128v5
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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