Resource title

Market depth and order size: an analysis of permanent price effects of DAX futures' trades

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Resource description

In this paper we empirically analyze the permanent price impact of trades by investigating the relation between unexpected net order flow and price changes. We use intraday data on German index futures. Our analysis based on a neural network model suggests that the assumption of a linear impact of orders on prices (which is often used in theoretical papers) is highly questionable. Therefore, empirical studies, comparing the depth of different markets, should be based on the whole price impact function instead of a simple ratio. To allow the market depth to depend on trade volume could open promising avenues for further theoretical research. This could lead to quite different trading strategies as in traditional models.

Resource author

Alexander Kempf, Olaf Korn

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/24262

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Adapt according to the presented license agreement and reference the original author.