Price Impact of Order Flow Imbalances

The study examines the price impact of order flow imbalances (differences between buy and sell orders), constructed from the order book data of Amazon.com, Inc., using the price impact model introduced by Cont et al. (2014). In contrast to Cont et al. (2014), the estimation results suggest the nonlinear or concave relation between price changes and order flow imbalances. Nevertheless, the intraday pattern of the estimated price impact is roughly similar to Cont et al. (2014). That is, the price impact is high around the time the market opens but small around its close. On the other hand, the quadratic price impact shows the exact opposite intraday pattern, suggesting that the nonlinear or concave relation between price changes and order flow imbalances is especially evident after the market opens.