Veröffentlichungen | Abstract

Market Depth and Order Size

in: Journal of Financial Markets, Vol. 2 (1999), S. 29-48

Prof. Dr. Alexander Kempf [University of Cologne]

Olaf Korn [Zentrum für Europäische Wirtschaftsforschung, Mannheim]

 

Abstract:

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.