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This research investigates how order flow imbalances affect price changes, aiming to refine existing models.

April 1, 2026Open Access

Price Impact of Order Flow Imbalances

Key Points

This research investigates how order flow imbalances affect price changes, aiming to refine existing models.
Analyzed order flow data from Amazon.com using a price impact model introduced by Cont et al. (2014).
Compared findings with earlier studies to assess similarities and differences in price impact patterns.
Examined intraday price impact patterns throughout the trading day.
Identified a nonlinear or concave relationship between price changes and order flow imbalances.
Found that price impact is high at market open but diminishes towards the close.
Observed that the quadratic price impact showed an opposite intraday pattern after the market opens.

Abstract

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.

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