Generating realistic metaorders from public data

Abstract: This paper introduces a novel algorithm for generating realistic metaorders from public trade data, addressing a longstanding challenge in price impact research that has traditionally relied on proprietary datasets. Our method effectively recovers all established stylized facts of metaorders impact, such as the Square Root Law, the concave profile during metaorder execution, and the post-execution decay. This algorithm not only overcomes the dependence on proprietary data, a major barrier to research reproducibility, but also enables the creation of larger and more robust datasets that may increase the quality of empirical studies. Our findings strongly suggest that average realized short-term price impact is not due to information revelation (as in the Kyle framework) but has a mechanical origin which could explain the universality of the Square Root Law.