2001/02/28 by Sergei Maslov, Mark Mills · 1 citation
Economics, Econometrics and Finance · Physics and Astronomy · #Complex Systems and Time Series Analysis #Financial Risk and Volatility Modeling #Theoretical and Computational Physics #cond-mat.dis-nn #cond-mat.stat-mech #q-fin.TR
paper · pdf · doi:10.1016/s0378-4371(01)00301-6
published as Physica A 299, 234-246 (2001). · To appear in proceedings of the NATO Advanced Research Workshop on Application of Physics in Economic Modelling, Prague 2001. 8 figures
arxiv created 2001/02/28 · openalex publication_date 2001/10/01 · arxiv updated 2009/11/30 · openalex created_date 2016/06/24 · openalex updated_date 2026/07/28
Statistical properties of an order book and the effect they have on price dynamics were studied using the high-frequency NASDAQ Level II data. It was observed that the size distribution of marketable orders (transaction sizes) has power law tails with an exponent 1+mumarket=2.4 ± 0.1. The distribution of limit order sizes was found to be consistent with a power law with an exponent close to 2. A somewhat better fit to this distribution was obtained by using a log-normal distribution with an effective power law exponent equal to 2 in the middle of the observed range. The depth of the order book measured as a price impact of a hypothetical large market order was observed to be a non-linear function of its size. A large imbalance in the number of limit orders placed at bid and ask sides of the book was shown to lead to a short term deterministic price change, which is in accord with the law of supply and demand.