Impact is not just volatility

Fr\'ed\'eric Bucci, Iacopo Mastromatteo, Michael Benzaquen and Jean-Philippe Bouchaud

Papers from arXiv.org

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: 2019-05
New Economics Papers: this item is included in nep-bec and nep-fmk
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1905.04569

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