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Explain Phenomenological Effects Not Accounted for by the Latent Liquidity Picture

Investigate and identify the real-market mechanisms that produce phenomenological aspects captured by the generalized propagator but not explained by the latent liquidity theory, and develop a coherent microstructural explanation for these effects.

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Background

The generalized propagator framework provides a convenient mathematical description of impact and decay, yet the latent liquidity model does not explain all observed phenomenology.

The authors explicitly note that some aspects remain unexplained and call for further work to uncover the microstructural drivers behind these effects, linking the phenomenology back to underlying mechanisms.

References

Of course, several open questions remain. We propose here several directions for future research: While the generalized propagator provides a convenient mathematical framework, some phenomenological aspects remain unexplained by the Latent Liquidity picture of Ref. . More work is needed to understand the mechanisms driving these effects in real markets (see also the discussion in ).

— The Subtle Interplay between Square-root Impact, Order Imbalance & Volatility II: An Artificial Market Generator (2509.05065 - Maitrier et al., 5 Sep 2025) in Conclusion