Feedback and efficiency in limit order markets

Damien Challet

Physica A: Statistical Mechanics and its Applications, 2008, vol. 387, issue 15, 3831-3836

Abstract: A consistency criterion for price impact functions in limit order markets is proposed that prohibits chain arbitrage exploitation. Both the bid-ask spread and the feedback of sequential market orders of the same kind onto both sides of the order book are essential to ensure consistency at the smallest time scale. All the stocks investigated in Paris Stock Exchange have consistent price impact functions.

Keywords: Limit order markets; Efficiency; Arbitrage; Feedback; Data analysis; Econophysics (search for similar items in EconPapers)
Date: 2008
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Working Paper: Feedback and efficiency in limit order markets (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:387:y:2008:i:15:p:3831-3836

DOI: 10.1016/j.physa.2008.01.086

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