Co-impact: crowding effects in institutional trading activity
| Autor: | Charles-Albert Lehalle, Fr'ed'eric Bucci, Fabrizio Lillo, Iacopo Mastromatteo, Jean-Philippe Bouchaud, Zoltan Eisler |
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| Přispěvatelé: | Bucci, F., Mastromatteo, I., Eisler, Z., Lillo, F., Bouchaud, J.-P., Lehalle, C.-A., Bouchaud, J. -P., Lehalle, C. -A. |
| Rok vydání: | 2019 |
| Předmět: |
Correlation coefficient
Market microstructure Institutional investor Subject (philosophy) Monetary economics FOS: Economics and business Institutional trading activity Order (exchange) 0502 economics and business Econometrics Economics 050207 economics Market impact model Large trade execution Quantitative Finance - Trading and Market Microstructure 050208 finance 05 social sciences Function (mathematics) Market microstructure Market impact model Large trade execution Institutional trading activity Crowding Trading and Market Microstructure (q-fin.TR) Value (economics) Market impact General Economics Econometrics and Finance Finance Sign (mathematics) |
| Zdroj: | Quantitative Finance. 20:193-205 |
| ISSN: | 1469-7696 1469-7688 |
| DOI: | 10.1080/14697688.2019.1660398 |
| Popis: | This paper is devoted to the important yet unexplored subject of crowding effects on market impact, that we call "co-impact". Our analysis is based on a large database of metaorders by institutional investors in the U.S. equity market. We find that the market chiefly reacts to the net order flow of ongoing metaorders, without individually distinguishing them. The joint co-impact of multiple contemporaneous metaorders depends on the total number of metaorders and their mutual sign correlation. Using a simple heuristic model calibrated on data, we reproduce very well the different regimes of the empirical market impact curves as a function of volume fraction $\phi$: square-root for large $\phi$, linear for intermediate $\phi$, and a finite intercept $I_0$ when $\phi \to 0$. The value of $I_0$ grows with the sign correlation coefficient. Our study sheds light on an apparent paradox: How can a non-linear impact law survive in the presence of a large number of simultaneously executed metaorders? |
| Databáze: | OpenAIRE |
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