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Market impact costs of institutional equity trades

  • Bikker, Jacob A.
  • Spierdijk, Laura
  • van der Sluis, Pieter Jelle

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.

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Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 26 (2007)
Issue (Month): 6 (October)
Pages: 974-1000

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Handle: RePEc:eee:jimfin:v:26:y:2007:i:6:p:974-1000
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30443

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