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Market Impact: Empirical Evidence, Theory and Practice

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  • Emilio Said

    (UdeM - Université de Montréal, ADIA - Abu Dhabi Investment Authority)

Abstract

We propose a theory of the market impact of metaorders based on a coarse-grained approach where the microscopic details of supply and demand is replaced by a single parameter ρ ∈ [0, +∞] shaping the supply-demand equilibrium and the market impact process during the execution of the metaorder. Our model provides an unified explanation of most of the empirical observations that have been reported and establishes a strong connection between the excess volatility puzzle and the order-driven view of the markets through the square-root law.

Suggested Citation

  • Emilio Said, 2022. "Market Impact: Empirical Evidence, Theory and Practice," Working Papers hal-03668669, HAL.
    • Handle: RePEc:hal:wpaper:hal-03668669
    Note: View the original document on HAL open archive server: https://hal.science/hal-03668669
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    References listed on IDEAS

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    Keywords

    Market microstructure; market impact model; price formation; excess volatility;
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