Permanent Market Impact

Permanent Market Impact is the lasting change in an asset's price that results from the execution of a large order. It represents a fundamental shift in the market's perception of the asset's value, as the trade signals information to other participants.

Once a large trade is completed, the price does not revert because the market has integrated the new information and established a new equilibrium. Distinguishing between permanent and temporary impact is vital for long-term investors who need to understand if their trades are contributing to price discovery or merely causing short-term noise.

This concept is fundamental to the study of price discovery in deep and liquid markets.