Impact is not just volatility

Frédéric Bucci, Iacopo Mastromatteo, Michael Benzaquen () and Jean-Philippe Bouchaud ()
Additional contact information
Iacopo Mastromatteo: SISSA / ISAS - Scuola Internazionale Superiore di Studi Avanzati / International School for Advanced Studies
Michael Benzaquen: LadHyX - Laboratoire d'hydrodynamique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique
Jean-Philippe Bouchaud: SPEC - UMR3680 - Service de physique de l'état condensé - IRAMIS - Institut Rayonnement Matière de Saclay (DRF) - CEA - Commissariat à l'énergie atomique et aux énergies alternatives - Université Paris-Saclay - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique

Post-Print from HAL

Abstract: The notion of market impact is subtle and sometimes misinterpreted. Here we argue that impact should not be misconstrued as volatility. In particular, the so-called "square-root impact law", which states that impact grows as the square-root of traded volume, has nothing to do with price diffusion, i.e. that typical price changes grow as the square-root of time. We rationalise empirical findings on impact and volatility by introducing a simple scaling argument and confronting it to data.

Date: 2019-07-05
New Economics Papers: this item is included in nep-mst
Note: View the original document on HAL open archive server: https://hal.science/hal-02323182
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published in Quantitative Finance, 2019, 19 (11), pp.1763-1766. ⟨10.1080/14697688.2019.1622768⟩

Downloads: (external link)
https://hal.science/hal-02323182/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02323182

DOI: 10.1080/14697688.2019.1622768

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().