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Journal article

Mechanical vs. informational components of price impact

Abstract:

We study the problem of what causes prices to change. It is well known that trading impacts prices — orders to buy drive the price up, and orders to sell drive it down. We introduce a means of decomposing the total impact of trading into two components, defining the mechanical impact of a trading order as the change in future prices in the absence of any future changes in decision making, and the informational impact as the remainder of the total impact once mechanical impact is removed...

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Authors


Farmer, JD More by this author
Journal:
The European Physical Journal B
Volume:
55
Issue:
2
Pages:
189-200
Publication date:
2007-01-05
URN:
uuid:df0efb31-b93c-49d3-b747-5b3fdddfd30d
Source identifiers:
387704
Local pid:
pubs:387704

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