Market Impact

This article or the following section is not adequately provided with supporting documents ( e.g. individual evidence ). Information without sufficient evidence could be removed soon. Please help Wikipedia by researching the information and including good evidence.

On financial markets called Market Impact (in German about market impact ) the influence that a market participant on the price of a financial instrument has when they bought or sold. The effect causes a price change against the interests of the market participant, price increases for purchases (by increasing demand) and price drops for sales (by increasing supply).

Especially for large investors, for example investment funds , the market impact is a parameter that must be taken into account when making decisions about transactions in the financial market. If the amount of money to be moved is large compared to the turnover of the financial instrument in question, then the market impact can amount to several percentage points and must be considered alongside other transaction costs .

A market participant who wants to limit his market impact must reduce the speed of his activities in order to avoid influencing the market price.