Market Impacts and the Life Cycle of Investors Orders

This study is the first to decipher market impact at all time scales on the same database, from a trade-by-trade scale to a daily one. Moreover, the very concentrated nature of the database (400,000 metaorders issued by investors, electronically traded, during one year - 2010 -, on European market all regulated by the same directive - MiFID -) ensures investors did not change their habits during the study. At the intraday scale, we con firm a square root temporary impact in the daily participation, and we shed light on a duration factor in 1/T-gamma with gamma similar or equal to 0:25. Including this factor in the fits reinforces the square root shape of impact. We observe a powerlaw for the transient impact with an exponent between 0: 5 (for long metaorders) and 0: 8 (for shorter ones). Moreover, we show that the market does not anticipate the size of the metaorders. The intraday decay seems to exhibit two regimes (though hard to identify precisely): a "slow" regime right after the execution of the metaorder followed by a faster one. At the daily time scale, we show price moves after a metaorder can be split between realizations of expected returns that have triggered the investing decision and an idiosynchratic impact that slowly decays to zero. Moreover, we propose a class of toy models based on Hawkes processes (the Hawkes Impact Model, HIM) to illustrate our reasoning. We show how the Impulsive-HIM model, despite its simplicity, embeds appealing features like transience and decay of impact. The latter is parametrized by a parameter C having a macroscopic interpretation: the ratio of contrarian reaction (i.e., impact decay) and of the "herding" reaction (i.e., impact amplification).