Slow decay of impact in equity markets

Abstract

Using a proprietary dataset of meta-orders and prediction signals, and assuming a quasi-linear impact model, we deconvolve market impact from past correlated trades and a predictable return component to elicit the temporal dependence of the market impact of a single daily meta-order, over a ten day horizon in various equity markets. We find that the impact of single meta-orders is to a first approximation universal and slowly decays to zero (or to a small value), possibly as a power-law. We show that auto-correlated order-flows and trade information contents fully accounts for the apparent plateau observed in the raw data. We discuss the possible bias introduced by the quasi-linear assumption.