# The short-term price impact of trades is universal

## TL;DR

This study demonstrates that the short-term price impact of trades is consistent across different market participants, indicating a universal behavior in electronic markets, which has implications for optimal trade execution strategies.

## Contribution

It provides empirical evidence that the magnitude and time dependence of trade impact are universal, based on a comparison of a single asset manager's trades with the rest of the market.

## Key findings

- Price impact is similar for a single asset manager and the market
- Order flow dynamics contribute to impact decay
- Impact propagator is consistent across market participants

## Abstract

We analyze a proprietary dataset of trades by a single asset manager, comparing their price impact with that of the trades of the rest of the market. In the context of a linear propagator model we find no significant difference between the two, suggesting that both the magnitude and time dependence of impact are universal in anonymous, electronic markets. This result is important as optimal execution policies often rely on propagators calibrated on anonymous data. We also find evidence that in the wake of a trade the order flow of other market participants first adds further copy-cat trades enhancing price impact on very short time scales. The induced order flow then quickly inverts, thereby contributing to impact decay.