The nature of price returns during periods of high market activity

Details The nature of price returns during periods of high market activity The nature of price returns during periods of high market activity

2010-10-20

arxiv.org/abs/1010.4226v3

Economy

Quantitative Finance

Trading and Market Microstructure

17 pages, 11 figures

Scientific paper

By studying all the trades and best bids/asks of ultra high frequency snapshots recorded from the order books of a basket of 10 futures assets, we bring qualitative empirical evidence that the impact of a single trade depends on the intertrade time lags. We find that when the trading rate becomes faster, the return variance per trade or the impact, as measured by the price variation in the direction of the trade, strongly increases. We provide evidence that these properties persist at coarser time scales. We also show that the spread value is an increasing function of the activity. This suggests that order books are more likely empty when the trading rate is high.

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