March 2 at 5 pm (CEST).
Presenters: Michele Vodret and Iacopo Mastromatteo. (CFM and Ecole Polytechnique)
Title: Understanding the relation between trades and price changes is of paramount importance for practitioners, yet challenging for theoreticians.
Abstract: On one hand models coming from econophysics/quantitative-finance literature predict a price impact function that slowly decays in order to compensate the long-range correlation of the order flow. On the other hand, these models lacks from a proper micro-foundation, customary in models coming from the theoretical economics literature, which build on rational expectations and asymmetric information, and typically prescribe linear impact. Recently, we extended the classic Kyle model, partially bridging the gap between these two classes of models. We will show our findings and suggest future lines of research.