Crossover from linear to square-Root market impact

Fr\'ed\'eric Bucci, Michael Benzaquen, Fabrizio Lillo and Jean-Philippe Bouchaud

Papers from arXiv.org

Abstract: Using a large database of 8 million institutional trades executed in the U.S. equity market, we establish a clear crossover between a linear market impact regime and a square-root regime as a function of the volume of the order. Our empirical results are remarkably well explained by a recently proposed dynamical theory of liquidity that makes specific predictions about the scaling function describing this crossover. Allowing at least two characteristic time scales for the liquidity (`fast' and `slow') enables one to reach quantitative agreement with the data.

Date: 2018-11
New Economics Papers: this item is included in nep-mst
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Published in Phys. Rev. Lett. 122, 108302 (2019)

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