Dresden 2003 – scientific programme

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AKSOE: Physik sozio-ökonomischer Systeme

AKSOE 10: Finanzm
ärkte und Risikomanagement III

AKSOE 10.1: Talk

Thursday, March 27, 2003, 14:00–14:30, BAR/205

Influence of supply and demand on stock price changes — •Philipp Weber and Bernd Rosenow — Institut für Theoretische Physik der Universität zu Köln, Zülpicher Straße 77, 50937 Köln

We study the dependence of stock price changes on the difference between supply and demand in the stock market, which is measured by the difference between the volume of buy and sell orders (order imbalance). The functional relation between the order imbalance in a given time interval and the expected price change is the price impact function [1,2]. We determine the price impact function for the 100 most frequently traded US stocks in the year 1997 by using trade and quote information from the TAQ data base. Our special interest are the tails of the price impact function, relating large order imbalances and large price changes. We discuss different mechanisms generating the 1000 largest price changes in the data set. [1] V. Plerou et al., Phys. Rev. E 66, 027104 (2002) [2] B. Rosenow, Int. J. Mod. Phys. C, Vol. 13, No. 3 (2002) 1-7