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Determinants of Transactions Costs in the Brazilian Stock Market

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  • Antonio Zoratto Sanvicente

    (Insper Instituto de Ensino e Pesquisa)

Abstract

The Lesmond (2005) method for estimating transactions costs, based on a limited-dependent variable model, is used in order to test for the significance of plausible explanations for cross sectional cost differences. Variables such as liquidity, volatility, firm size, quality of corporate governance and participation in ADR programs are considered, in addition to the possible impact of the 2008 crisis. Daily data for 1999-2009 are used, covering at least 250 securities each year. The average total transaction cost declined from 2.95% in 1999 to 1.22% in 2009. Stock volatility and quality of corporate governance appear to be the most relevant factors associated with the measure of transactions cost.

Suggested Citation

  • Antonio Zoratto Sanvicente, 2012. "Determinants of Transactions Costs in the Brazilian Stock Market," Brazilian Review of Finance, Brazilian Society of Finance, vol. 10(2), pages 179-196.
    • Handle: RePEc:brf:journl:v:10:y:2012:i:2:p:179-196
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    References listed on IDEAS

    as
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    2. Lesmond, David A., 2005. "Liquidity of emerging markets," Journal of Financial Economics, Elsevier, vol. 77(2), pages 411-452, August.
    3. Glosten, Lawrence R. & Milgrom, Paul R., 1985. "Bid, ask and transaction prices in a specialist market with heterogeneously informed traders," Journal of Financial Economics, Elsevier, vol. 14(1), pages 71-100, March.
    4. Amihud, Yakov & Mendelson, Haim, 1986. "Asset pricing and the bid-ask spread," Journal of Financial Economics, Elsevier, vol. 17(2), pages 223-249, December.
    5. Lesmond, David A & Ogden, Joseph P & Trzcinka, Charles A, 1999. "A New Estimate of Transaction Costs," The Review of Financial Studies, Society for Financial Studies, vol. 12(5), pages 1113-1141.
    6. Amihud, Yakov, 2002. "Illiquidity and stock returns: cross-section and time-series effects," Journal of Financial Markets, Elsevier, vol. 5(1), pages 31-56, January.
    7. Stoll, Hans R, 1989. " Inferring the Components of the Bid-Ask Spread: Theory and Empirical Tests," Journal of Finance, American Finance Association, vol. 44(1), pages 115-134, March.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    transactions cost; information asymmetry; stock trading; operational efficiency; limited dependent variables;
    All these keywords.

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G19 - Financial Economics - - General Financial Markets - - - Other

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