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

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Bikker, Jacob A. and Spierdijk, Laura and Sluis van der, Pieter-Jelle (2010) What factors increase the risk of incurring high market impact costs? Applied Economics, 42 (3). pp. 369-387. ISSN 1466-4283

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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.
Item Type:Article
Copyright:© 2010 Routledge
Faculty:
Electrical Engineering, Mathematics and Computer Science (EEMCS)
Link to this item:http://purl.utwente.nl/publications/68685
Official URL:http://dx.doi.org/10.1080/00036840701604461
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