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arXiv · 1811.05230

Crossover from linear to square-Root market impact

Frédéric Bucci·Michael Benzaquen·Fabrizio Lillo·Jean-Philippe Bouchaud
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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.

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Frédéric Bucci, Michael Benzaquen, Fabrizio Lillo, Jean-Philippe Bouchaud. 2018-11-13. Crossover from linear to square-Root market impact. https://doi.org/10.1103/physrevlett.122.108302

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