Search results for "Market impact"
showing 7 items of 7 documents
How does learning affect market liquidity? A simulation analysis of a double-auction financial market with portfolio traders
2007
We study the relationship between liquidity and prices in an artificial financial market where portfolio traders with limited resources interact through a continuous, electronic open book. We depart from the standard asset pricing framework in two ways. First, we assume that investors have incomplete information about the distribution of returns. Second, we model the portfolio choice problem using prospect-type preferences. We model the utility function in terms of deviations of the portfolio growth rate from a specified target growth rate, and we assume that investors are more sensitive to downside movements. We show that the parameters defining the learning process affect the price dynami…
Deregulated Electric Energy Price Forecasting in NordPool Market using Regression Techniques
2019
Deregulated electricity market day-ahead electrical energy price forecasting is important. It is influenced by external parameters and it is a complicated function. In this work two neighboring regions in the NordPool market are analyzed to provide day-ahead electrical price forecasting using regression techniques. The characteristics of the NordPool market trading behavior leads to unanticipated price peaks at daily, weekly and annual level. The considered two Nordic regions have different energy generation sources (e.g Norway has controllable hydro power, Denmark has non-controllable wind-power) therefore day-ahead electrical energy price forecasting in deregulated market for these two ne…
The evolution of market power in European banking
2017
This paper analyses the effect that European financial market integration has had on the evolution of the banks' market power disparities. The results show that market power disparity has narrowed among eurozone banks. The reduction is attributable to the convergence in the average levels of market power of the European banking sectors. In contrast, the disparities observed within each country have remained stable. As a result, the measures adopted to advance towards a single banking market should be complemented by measures at the national level designed to intensify competition among the banks within a given country.
How markets slowly digest changes in supply and demand
2008
In this article we revisit the classic problem of tatonnement in price formation from a microstructure point of view, reviewing a recent body of theoretical and empirical work explaining how fluctuations in supply and demand are slowly incorporated into prices. Because revealed market liquidity is extremely low, large orders to buy or sell can only be traded incrementally, over periods of time as long as months. As a result order flow is a highly persistent long-memory process. Maintaining compatibility with market efficiency has profound consequences on price formation, on the dynamics of liquidity, and on the nature of impact. We review a body of theory that makes detailed quantitative pr…
Market Impact and Trading Profile of Hidden Orders in Stock Markets
2009
We empirically study the market impact of trading orders. We are specifically interested in large trading orders that are executed incrementally, which we call hidden orders. These are statistically reconstructed based on information about market member codes using data from the Spanish Stock Market and the London Stock Exchange. We find that market impact is strongly concave, approximately increasing as the square root of order size. Furthermore, as a given order is executed, the impact grows in time according to a power law; after the order is finished, it reverts to a level of about 0.5-0.7 of its value at its peak. We observe that hidden orders are executed at a rate that more or less m…
Calibration of optimal execution of financial transactions in the presence of transient market impact
2012
Trading large volumes of a financial asset in order driven markets requires the use of algorithmic execution dividing the volume in many transactions in order to minimize costs due to market impact. A proper design of an optimal execution strategy strongly depends on a careful modeling of market impact, i.e. how the price reacts to trades. In this paper we consider a recently introduced market impact model (Bouchaud et al., 2004), which has the property of describing both the volume and the temporal dependence of price change due to trading. We show how this model can be used to describe price impact also in aggregated trade time or in real time. We then solve analytically and calibrate wit…
Four Conceptual Perspectives of Innovation Components
2019
The study provides a detailed analysis of high impact to market innovations, without sorting whether these are innovations of low or high technological progress. The research base sample includes a detailed analysis of 58 consumer product innovations that reached a high market impact over the period 2014–2017, i.e. the consumers purchased them considerably more than other innovations. The study examines the components of these innovations in detail; they are also grouped into 4 basic groups. It is concluded in the study that the high impact to market innovations are made up of recurring 34 components. The study also concludes that the open innovation components only partly overlap with the …