TY - BOOK
T1 - Market impact costs of institutional equity trades
AU - Bikker, Jacob A.
AU - Spierdijk, Laura
AU - van der Sluis, Pieter Jelle
PY - 2004
Y1 - 2004
N2 - This paper is the first to analyze market impact and execution costs of equity trading by a pension fund. We find that, on average, these costs are nonnegligible. Average market impact costs equal 20 basis points for buys and 30 basis points for sells; average execution costs equal 27 basis points and 38 basis points, respectively. Furthermore, we show that relative trade size and market capitalization, commonly found to play an important role, have only limited influence on the market impact of a trade. The most important determinants of the price effect are momentum, stock price volatility, investment style, trade type (agency, single, or principal), and trading venue.
AB - This paper is the first to analyze market impact and execution costs of equity trading by a pension fund. We find that, on average, these costs are nonnegligible. Average market impact costs equal 20 basis points for buys and 30 basis points for sells; average execution costs equal 27 basis points and 38 basis points, respectively. Furthermore, we show that relative trade size and market capitalization, commonly found to play an important role, have only limited influence on the market impact of a trade. The most important determinants of the price effect are momentum, stock price volatility, investment style, trade type (agency, single, or principal), and trading venue.
KW - MSC-62J05
KW - MSC-62P20
KW - Market impact costs
KW - Trading costs
KW - Price effects
KW - Institutional equity trading
KW - Pension funds
M3 - Report
T3 - Memorandum / Department of Applied Mathematics
BT - Market impact costs of institutional equity trades
PB - University of Twente, Department of Applied Mathematics
CY - Enschede
ER -