Order-splitting and long-memory in an order-driven market

R. Yamamoto, B. Lebaron

Research output: Contribution to journalArticle

13 Citations (Scopus)

Abstract

Recent empirical research has documented long-memories of trading volume, volatility, and order-signs in stock markets. We conjecture that traders' order-splitting is related to these empirical features. This study conducts simulations on an order-driven economy where agents split their orders into small pieces and execute piece by piece to reduce price impact. We demonstrate that we can replicate the long-memories in our order-splitting economy and conclude that order-splitting can be a possible cause for these empirical properties.

Original languageEnglish
Pages (from-to)51-57
Number of pages7
JournalEuropean Physical Journal B
Volume73
Issue number1
DOIs
Publication statusPublished - 2010 Jan 1
Externally publishedYes

ASJC Scopus subject areas

  • Electronic, Optical and Magnetic Materials
  • Condensed Matter Physics

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