What factors increase the risk of incurring high market impact costs?

Jacob A. Bikker, L. Spierdijk, Pieter Jelle van der Sluis

    Research output: Contribution to journalArticleAcademicpeer-review

    6 Citations (Scopus)

    Abstract

    This article applies quantile regression to assess the factors that influence the risk of incurring high trading costs. Using data on the equity trades of the world’s second largest pension fund in the first quarter of 2002, we show that trade timing, momentum, volatility and the type of broker intermediation are the major determinants of the risk of incurring high trading costs. Such risk is increased substantially by either high or low momentum and by strong volatility. Moreover, agency trades are substantially more risky in terms of trading costs than similar principal trades. Finally, we show that the quantile regression model succeeds well in forecasting future trading costs.
    Original languageUndefined
    Article number10.1080/00036840701604461
    Pages (from-to)369-387
    Number of pages19
    JournalApplied economics
    Volume42
    Issue number3
    DOIs
    Publication statusPublished - 2010

    Keywords

    • MSC-91B28
    • EWI-16919
    • IR-68685
    • METIS-277392

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