@article{Cont:2013:jjfinec/nbt003,
author = {Cont, R and Kukanov, A and Stoikov, S},
doi = {jjfinec/nbt003},
journal = {Journal of Financial Econometrics},
pages = {47--88},
title = {The Price Impact of Order Book Events},
url = {http://dx.doi.org/10.1093/jjfinec/nbt003},
volume = {12},
year = {2013}
}

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TY  - JOUR
AB  - We study the price impact of order book events - limit orders, market ordersand cancelations - using the NYSE TAQ data for 50 U.S. stocks. We show that,over short time intervals, price changes are mainly driven by the order flowimbalance, defined as the imbalance between supply and demand at the best bidand ask prices. Our study reveals a linear relation between order flowimbalance and price changes, with a slope inversely proportional to the marketdepth. These results are shown to be robust to seasonality effects, and stableacross time scales and across stocks. We argue that this linear price impactmodel, together with a scaling argument, implies the empirically observed"square-root" relation between price changes and trading volume. However, therelation between price changes and trade volume is found to be noisy and lessrobust than the one based on order flow imbalance.
AU  - Cont,R
AU  - Kukanov,A
AU  - Stoikov,S
DO  - jjfinec/nbt003
EP  - 88
PY  - 2013///
SP  - 47
TI  - The Price Impact of Order Book Events
T2  - Journal of Financial Econometrics
UR  - http://dx.doi.org/10.1093/jjfinec/nbt003
UR  - http://arxiv.org/abs/1011.6402v3
VL  - 12
ER  - 

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