Before revision:  For equity order flow this persistence is extremely long-ranged, with positive correlations spanning thousands of orders, over time intervals of up to several days. Such persistence in supply and demand is economically important because it influences the market impact as a function of both time and size and because it indicates that the market is in a sense out of equilibrium. Persistence can be caused by two types of behavior : (1) Order splitting, in which a single investor repeatedly places an order of the same sign, or (2) herding, in which different investors place orders of the same sign. We develop a method to decompose the autocorrelation function into splitting and herding components and apply this to order flow data from the London Stock Exchange containing exchange membership identifiers.
After revision:  For equity order flow this persistence is extremely long-ranged, with positive correlations spanning thousands of orders, corresponding to many days. Two possible explanations are herding, corresponding to positive correlation in the behavior of different investors, or order splitting, corresponding to positive autocorrelation in the behavior of single investors. We investigate this using order flow data from the London Stock Exchange containing exchange membership identifiers.