Regensburg 2016 – scientific programme

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SOE: Fachverband Physik sozio-ökonomischer Systeme

SOE 14: Financial Markets and Risk Management I

SOE 14.4: Talk

Wednesday, March 9, 2016, 12:00–12:15, H36

Statistical Properties of DAX Limit Order Books on Xetra — •Winfried Reimann and Stephan Eule — Max-Planck-Institute for Dynamics and Self-Organization, Göttingen, Germany

Most modern financial markets nowadays employ limit order books to temporarily store buy and sell orders and execute them. In these order books the central economic question of price formation can be investigated from a microscopic point of view using high frequency data. Prior analyses of such data have mainly focused on three different issues:

(i) Statistics of price determining quantities such as price jump distributions and market impact;

(ii) the influence of order placement and cancellations on those statistics;

(iii) the effect of the order book's state itself on the dynamics of the order flow.

We apply such analyses for the first time to order books from Deutsche Börse's continuous trading market Xetra. Thereby we focus on the influence of the book's state on the order flow. The idea behind that is that financial markets as complex systems have their own internal dynamics with multiple feedback mechanisms, in which external information only partly influences the price formation. We aim at discovering such feedback mechanisms.