We perform an empirical investigation of 'market impact' of trades using a large dataset of transactions executed by institutional investors in the US equity market. We find that price variations during trade execution are mainly driven by the aggregate order flow imbalance rather than the...

We propose and study a simple stochastic model for the dynamics of a limit order book, in which arrivals of market order, limit orders and order cancellations are described in terms of a Markovian queueing system. Through its analytical tractability, the model allows to obtain analytical...

To execute a trade, participants in electronic equity markets may choose to submit limit orders or market orders across various exchanges where a stock is traded. This decision is influenced by the characteristics of the order flow and queue sizes in each limit order book, as well as the...

Time series of financial asset returns often exhibit the volatility clustering property: large changes in prices tend to cluster together, resulting in persistence of the amplitudes of price changes. After recalling various methods for quantifying and modeling this phenomenon, we discuss several...

The availability of high-frequency data on transactions, quotes and order flow in electronic order-driven markets has revolutionized data processing and statistical modeling techniques in finance and brought up new theoretical and computational challenges. Market dynamics at the transaction...

We study the price impact of order book events - limit orders, market orders and 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 flow imbalance, defined as the imbalance between supply and demand at...