Equity auction dynamics: latent liquidity models with activity acceleration

Mohammed Salek (mohammed.salek@centralesupelec.fr), Damien Challet (damien.challet@centralesupelec.fr) and Ioane Muni Toke (ioane.muni-toke@centralesupelec.fr)
Additional contact information
Mohammed Salek: CentraleSupélec, MICS - Mathématiques et Informatique pour la Complexité et les Systèmes - CentraleSupélec - Université Paris-Saclay, FiQuant - Chaire de finance quantitative - MICS - Mathématiques et Informatique pour la Complexité et les Systèmes - CentraleSupélec - Université Paris-Saclay
Damien Challet: MICS - Mathématiques et Informatique pour la Complexité et les Systèmes - CentraleSupélec - Université Paris-Saclay, FiQuant - Chaire de finance quantitative - MICS - Mathématiques et Informatique pour la Complexité et les Systèmes - CentraleSupélec - Université Paris-Saclay
Ioane Muni Toke: MICS - Mathématiques et Informatique pour la Complexité et les Systèmes - CentraleSupélec - Université Paris-Saclay

Post-Print from HAL

Abstract: Equity auctions display several distinctive characteristics in contrast to continuous trading. As the auction time approaches, the rate of events accelerates causing a substantial liquidity buildup around the indicative price. This, in turn, results in a reduced price impact and decreased volatility of the indicative price. In this study, we adapt the latent/revealed order book framework to the specifics of equity auctions. We provide precise measurements of the model parameters, including order submissions, cancellations, and diffusion rates. Our setup allows us to describe the full dynamics of the average order book during closing auctions in Euronext Paris. These findings support the relevance of the latent liquidity framework in describing limit order book dynamics. Lastly, we analyze the factors contributing to a sub-diffusive indicative price and demonstrate the absence of indicative price predictability.

Keywords: Market microstructure; Continuous models; Statistical analysis; Equity auctions (search for similar items in EconPapers)
Date: 2024-01-12
New Economics Papers: this item is included in nep-mst
Note: View the original document on HAL open archive server: https://hal.science/hal-04391810v2
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Quantitative Finance, 2024, 24 (10), pp.1381-1398. ⟨10.1080/14697688.2024.2367680⟩

Downloads: (external link)
https://hal.science/hal-04391810v2/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-04391810

DOI: 10.1080/14697688.2024.2367680

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD (hal@ccsd.cnrs.fr).