K. Lo and R. Coggins (Australia)
Market Microstructure, Trading Costs and Liquidity, Time Series Analysis, Modelling and Simulation
This paper presents three different empirical price impact models. Using transaction data on the Australian Stock Ex change, we investigate the non-linear relationship between price changes and trading activity. We find liquidity fluctu ations also affect price impact. We also apply a VAR model for returns and order imbalance on actively traded stocks on the ASX. We consider models of price impact which have two components: temporary and permanent impacts, with temporary impact due to demand for immediacy and permanent impact interpreted as the information content of the trade.
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