The slippage paradox
AbstractBuying or selling assets leads to transaction costs for the investor. On one hand, it is well know to all market practionaires that the transaction costs are positive on average and present therefore systematic loss. On the other hand, for every trade, there is a buy side and a sell side, the total amount of asset and the total amount of cash is conserved. I show, that the apparently paradoxical observation of systematic loss of all participants is intrinsic to the trading process since it corresponds to a correlation of outstanding orders and price changes.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1103.2214.
Date of creation: Mar 2011
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-19 (All new papers)
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