Statistical properties of stock order books: empirical results and models

By Jean-Philippe Bouchaud, M. M'ezard, Marc Potters. 2002

410 citations recorded by the source corpus.

Abstract We investigate several statistical properties of the order book of three liquid stocks of the Paris Bourse. The results are to a large degree independent of the stock studied. The most interesting features concern (i) the statistics of incoming limit order prices, which follows a power-law around the current price with a diverging mean; and (ii) the shape of the average order book, which can be quantitatively reproduced using a ‘zero intelligence’ numerical model and qualitatively predicted using a simple approximation.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/5ca5da588489de4d1a2fa3e94c8258a3549d7196

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

In Finance

Citations in the corpus

Econophysics: Empirical facts and agent-based models (2009, neutral): “a. Placement of arriving limit orders Bouchaud et al. (2002) observe a broad power-law placement around the best quotes on French stocks, confirmed in Potters and Bouchaud (2003) on US stocks.”
Relation between bid–ask spread, impact and volatility in order-driven markets (2006, background): “…market order flows have been analysed to understand the distribution of the bid–ask spread, and relate its average value to flow and cancellation rates (Biais et al. 1997, Foucault 1999, Bouchaud et al. 2002, Daniels et al. 2003, Foucault et al. 2003, Luckock 2003, Smith et al. 2003, Rosu 2005).”
Anomalous price impact and the critical nature of liquidity in financial markets (2011, background): “Correspondingly, the average shape of the true order book is non monotonous [22], and thus very different from the linear prediction, Eq.”
Econophysics review: II. Agent-based models (2011, neutral): “Bouchaud et al. (2002) and Potters and Bouchaud (2003) provide statistical features of the order book itself.”
Statistical theory of the continuous double auction (2002, background): “In particular it has been found that a power-law order placement process is relevant [23, 26].”
Order book approach to price impact (2003, background): “The average order book and thus the virtual price impact can be decsribed by ‘zero intelligence models’ (Bouchaud et al. 2002, Daniels et al. 2003), in which orders are placed randomly.”
Limit order books (2010, methodology): “No significant difference was detected between the mean bid-side and the mean ask-side relative depth profiles on the Paris Bourse (Biais et al. 1995, Bouchaud et al. 2002), NASDAQ (Potters and Bouchaud 2003) and Standard and Poor’s Depositary Receipts (SPY)‡ (Potters and Bouchaud 2003).”
A Dynamic Model of the Limit Order Book (2009, positive): “11 In most financial markets, cancellation of a limit order is free, although one may argue that there are still monitoring costs.”
A Mathematical Approach to Order Book Modelling (2010, background): “Moreover, the arrival rates are independent of the price level, which has the advantage of enabling the analytical predictions summarized in table 1.”
The Impact of Heterogeneous Trading Rules on the Limit Order Book and Order Flows (2007, methodology): “The Impact of Heterogeneous Trading Rules on the Limit Order Book and Order Flows Carl Chiarella∗ School of Finance and Economics University of Technology, Sidney,”
No-dynamic-arbitrage and market impact (2010, positive): “With ¼ 0.6 as estimated by Bouchaud et al. (2002), we obtain the density plotted in figure 1.”
Order Book Dynamics in Liquid Markets: Limit Theorems and Diffusion Approximations (2012, methodology): “Empirical studies Bouchaud et al. (2002, 2008), Gopikrishnan et al. (2000), Maslov and Mills (2001) have shown that order sizes are highly heterogeneous and exhibit heavy-tailed distributions, with Pareto-type tails: ( V ≥ x ) ∼ Cx − β with tail exponent β > 0 between 2 and 3, which corresponds to…”
Modelling high-frequency limit order book dynamics with support vector machines (2015, background): “…and typically unvalidated mathematical assumptions on models, parameters may be unobservable, and the intensive computation required by statistical methods makes them difﬁcult to be deployed in real world environments (Parlour 1998, Biais et al. 2000, Bouchaud et al. 2002, Foucault et al. 2005).”