Measuring the price impact from large trades and order flow: an empirical study in market microstructure on Oslo Stock Exchange

摘要

Theories of market microstructure suggest that large transactions can reveal information andhence impact prices. Extensive research finds support for such a price impact. However, weare not aware of any similar studies at Oslo Stock Exchange (OSE). Other studies havetypically been conducted at hybrid markets, e.g. New York Stock Exchange, where there arespecialists that facilitate trading. OSE, on the other hand, is a fully electronic limit ordermarket, thus the price dynamics may be different. The implication of a price impact for atrader who plans to submit multiple orders in a stock is that the first trades affect the price ofthe later trades.We analyze the temporary and permanent impact on security prices from large buy-initiatedand sell-initiated transactions. We find that large trades are associated with significant priceimpacts 5 seconds and 10 minutes after the transactions for most of the stocks in the sample.There are significant intraday differences in the estimated price impacts. Furthermore, westudy the aggregated difference between buy-initiated and sell-initiated turnover, i.e. orderflow. We analyze a model where returns over 15 minute intervals are explained by the pastorder flows. Normalized order flow has a significant effect on returns, but it explains little ofthe variance.