Statistical Properties of Market Collective Responses

Eur. Phys. J. B 91: 191, 2018, DOI: 10.1140/epjb/e2018-80665-0

17 Pages Posted: 20 Nov 2017 Last revised: 21 Sep 2018

See all articles by Shanshan Wang

Shanshan Wang

Faculty of Physics, University of Duisburg-Essen

Sebastian Neusüß

Deutsche Börse AG

Thomas Guhr

University of Duisburg-Essen

Date Written: September 10, 2017

Abstract

We empirically analyze the price and liquidity responses to trade signs, traded volumes and signed traded volumes. Utilizing the singular value decomposition, we explore the interconnections of price responses and of liquidity responses across the whole market. The statistical characteristics of their singular vectors are well described by the t location-scale distribution. Furthermore, we discuss the relation between prices and liquidity with respect to their overlapping factors. The factors of price and liquidity changes are non-random when these factors are related to the traded volumes. This means that the traded volumes play a critical role in the price change induced by the liquidity change. In contrast, the two kinds of factors are weakly overlapping when they are related to the trade signs and signed traded volumes. Hence, an imbalance of liquidity is related to the price change.

Keywords: market impact, liquidity, singular value decomposition, statistical properties

JEL Classification: G12, G14, D30, C81

Suggested Citation

Wang, Shanshan and Neusüß, Sebastian and Guhr, Thomas, Statistical Properties of Market Collective Responses (September 10, 2017). Eur. Phys. J. B 91: 191, 2018, DOI: 10.1140/epjb/e2018-80665-0. Available at SSRN: https://ssrn.com/abstract=3072835 or http://dx.doi.org/10.2139/ssrn.3072835

Shanshan Wang (Contact Author)

Faculty of Physics, University of Duisburg-Essen ( email )

Lotharstrasse 1
Duisburg, 47048
Germany

Sebastian Neusüß

Deutsche Börse AG ( email )

Neue Börsenstr. 1
60485 Frankfurt/Main, 60485
Germany

Thomas Guhr

University of Duisburg-Essen ( email )

Lotharstrasse 1
Duisburg, 47048
Germany

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