Dresden 2011 – scientific programme
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SOE: Fachverband Physik sozio-ökonomischer Systeme
SOE 18: Financial Markets and Risk Management I
SOE 18.4: Talk
Thursday, March 17, 2011, 11:00–11:15, GÖR 226
Heterogeneity in individual price impact — •Alex Bladon1, Tobias Galla1, and Esteban Moro2 — 1Theoretical Physics Dept. University of Manchester, Oxford Road, Manchester, UK, M13 9PL — 2Departament de Matemáticas, Universidad Carlos III de Madrid, 28911, Leganés, Spain
The study of financial time series has become a substantial area of research thanks to the large amount of available data. However, the majority of this data contains no information about what traders are associated with any one transaction. Hence there is little empirical information on the behaviour of individuals on financial markets. We here present an analysis of data from the Spanish stock market capturing this individual level information, linking each trade to the IDs of the firms involved.
We use this data to investigate how individual firms manage price impact. Price impact describes the change in the price of a stock due to a trades of different sizes - a phenomenon studied at length at the market level. We show that there is a high degree of heterogeneity in the instantaneous price impact functions of individuals and find evidence suggesting the use of selective liquidity taking. We also consider time-dependent price impact, as measured by response functions. Bouchaud et al propose a market-level bare impact function (Quantitative Finance, Vol. 4, 176-190, 2004) describing how markets digest trades over time. We test the applicability of this global model to individual agents and ask how strongly response functions depend on what individuals were involved in the transaction triggering the response.