Agent-specific impact of single trades in financial markets

Authors: Alex Bladon, Esteban Moro y Tobias Galla
Journal: Physical Review E 85, 036103 (2012) LINK | arXiv

Abstract: We present an analysis of the price impact associated with single trades effected by different financial firms. Using data from the Spanish Stock Market, we find a high degree of heterogeneity across different market members, both in the instantaneous impact functions and in the time-dependent market response to trades by individual members. This heterogeneity is statistically incompatible with the existence of market-wide universal impact dynamics that apply uniformly to all trades and suggest that, rather, market dynamics emerge from the complex interaction of different behaviors of market participants. Several possible reasons for this are discussed, along with potential extensions one may consider to increase the range of applicability of existing models of market impact.

Esteban Moro Written by:

Professor at Universidad Carlos III de Madrid and MIT Medialab. Working on Complex Systems, Social Networks and Urban Science.

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