Price Impacts

We construct the limit order book at 5-minute intervals for a sample of 120 stocks and investigate the properties of the price impact of executing market orders of varying sizes against the limit order book. We find that this total price impact is convex in trade size. Traders respond to the state of the order book in that the average trade size executed in an interval is negatively related to the price impact function at the beginning of the period. Price impact is largest in the morning and declines throughout the day. Price impact is symmetric among bid and asks near the front of the order book, and diverges deeper in the order book.