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I'm reading a paper on order anticipation strategy and came across this line in the paper:

We assume that all model parameters, including n and ∆ := (∆0 , . . . , ∆n ), are known to all strategic traders. Hence all traders anticipate the net orders of all other traders.

I have read similar arguments made in some other papers as well. I wonder if it is fair to make such an assumption. I havent read the entire paper because this line left me puzzled. Can someone please share some insights on this points.

Link to the paper

---EDIT---- In the above comment. n is the number of strategic participants and ∆i is the number of shares that the ith participants want to buy/sell.

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First of all, you may have a look at two other papers

In the second one, we explain how on the long run, market participants try to anticipate price pressure. For instance intermediaries (ie investment banks and brokers) often publish analysis on the "current trends" in term of flows.

Moreover, on the short term, you can have a look at this other paper

We give in it the example of the predictive power of the liquidity imbalance. This "signal" is often used in intraday. At my knowledge, it has been popularized by Trade arrival dynamics and quote imbalance in a limit order book.

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  • $\begingroup$ Thanks a lot Mr. Lehalle. I'm reading through the papers you've mentioned $\endgroup$ – nimbus3000 Apr 4 '17 at 17:42

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