Price impact in equity auctions: zero, then linear

Mohammed Salek (), Damien Challet () and Ioane Muni Toke ()
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Mohammed Salek: CentraleSupélec, 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
Ioane Muni Toke: CentraleSupélec, MICS - Mathématiques et Informatique pour la Complexité et les Systèmes - CentraleSupélec - Université Paris-Saclay

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Abstract: Using high-quality data, we report several statistical regularities of equity auctions in the Paris stock exchange. First, the average order book density is linear around the auction price at the time of auction clearing and has a large peak at the auction price. While the peak is due to slow traders, the order density shape is the result of subtle dynamics. The impact of a new market order or cancellation at the auction time can be decomposed into three parts as a function of the size of the additional order: (1) zero impact, caused by the discrete nature of prices, sometimes up to a surprisingly large additional volume relative to the auction volume (2) linear impact for additional orders up to a large fraction of the auction volume (3) for even larger orders price impact is non-linear, frequently super-linear.

Keywords: Equity Auctions; Market Microstructure; Price Impact; Statistical Analysis (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-mst
Note: View the original document on HAL open archive server: https://hal.science/hal-03938660v2
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Published in Market microstructure and liquidity, In press

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