The market impact of a limit order
Nikolaus Hautsch and
Ruihong Huang
Journal of Economic Dynamics and Control, 2012, vol. 36, issue 4, 501-522
Abstract:
We quantify the short-run and long-run price effect of posting a limit order in an order book market by proposing a high-frequency cointegrated VAR model for quotes and order book depth. Estimating impulse response functions based on data from 30 stocks traded at Euronext Amsterdam we show that limit orders have significant market impacts. The strength and direction of quote responses depend on the incoming orders' aggressiveness, their size and the state of the book. The effects are qualitatively stable across the market. Cross-sectional variations in the magnitudes of price impacts are well explained by the underlying trading frequency and relative tick size.
Keywords: Price impact; Limit order; Impulse response function; Cointegration (search for similar items in EconPapers)
JEL-codes: G14 G17 G32 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (52)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165188911002375
Full text for ScienceDirect subscribers only
Related works:
Working Paper: The market impact of a limit order (2009) 
Working Paper: The market impact of a limit order (2009) 
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:eee:dyncon:v:36:y:2012:i:4:p:501-522
DOI: 10.1016/j.jedc.2011.09.012
Access Statistics for this article
Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok
More articles in Journal of Economic Dynamics and Control from Elsevier
Bibliographic data for series maintained by Catherine Liu ().