Regensburg 2004 – scientific programme

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AKSOE: Physik sozio-ökonomischer Systeme

AKSOE 3: Postersitzung

AKSOE 3.1: Poster

Monday, March 8, 2004, 16:00–18:00, Poster D

Order book approach to price impact — •Philipp Weber and Bernd Rosenow — Institut für Theoretische Physik der Universität zu Köln, Zülpicher Straße 77, 50937 Köln

Stock price changes due to an imbalance of supply and demand are described by the price impact function. We compare the actual price impact of market orders with the virtual price impact calculated from the limit order book. The latter one would be caused by a market order matched with limit orders from the order book. This impact is found to be four times stronger than the actual price impact of market orders. We explain this difference with a dynamical feedback mechanism related to strong anticorrelations between returns and limit orders. Including this dynamical effect, we present a quantitative explanation of the price impact function using order book information.