We present an empirical study of price reversion after the executed metaorders. We use a dataset with more than 8 million metaorders executed by institutional investors in the US equity market. We show that relaxation takes place as soon as the metaorder ends: while at the end of the same day, it is on average ≈2∕3 of the peak impact, the decay continues for the next few days, following a power-law function at short-time scales, and converges to a non-zero asymptotic value at long-time scales (∼50 days) equal to ≈1∕2 of the impact at the end of the first day, that is ≈1∕3 of peak impact. Due to a significant, multiday correlation of the sign of executed metaorders, a careful deconvolution of the observed impact must be performed to extract the estimate of the impact decay of isolated metaorders.

Slow Decay of Impact in Equity Markets: Insights from the ANcerno Database

Lillo, Fabrizio;
2018

Abstract

We present an empirical study of price reversion after the executed metaorders. We use a dataset with more than 8 million metaorders executed by institutional investors in the US equity market. We show that relaxation takes place as soon as the metaorder ends: while at the end of the same day, it is on average ≈2∕3 of the peak impact, the decay continues for the next few days, following a power-law function at short-time scales, and converges to a non-zero asymptotic value at long-time scales (∼50 days) equal to ≈1∕2 of the impact at the end of the first day, that is ≈1∕3 of peak impact. Due to a significant, multiday correlation of the sign of executed metaorders, a careful deconvolution of the observed impact must be performed to extract the estimate of the impact decay of isolated metaorders.
2018
Market impacti; Impact decay; informed trades; fair pricing theory
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11384/83616
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