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Trading Costs for Emerging Market Stocks

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  • GONZALO CHAVEZ

    () (Instituto de Empresa)

Abstract

We estimate trading costs that include explicit, implicit and opportunity costs. The Lesmond et al. (1999) limited dependent variable model of returns is applied to stocks in Argentina, Brazil, Chile and Mexico. Costs are compared across countries for samples matched by market value. Comparisons are performed while controlling for variations in the economic variables that affect trading costs using regression models [Bessembinder & Kaufman (1997)]. We find that trading costs for large and medium firms are significantly higher for Brazil and Mexico than for Argentina and Chile. This result is interesting given that the two former markets are, by far, the most active markets in Latin America.

Suggested Citation

  • Gonzalo Chavez, 2004. "Trading Costs for Emerging Market Stocks," Working Papers Economia wp04-04, Instituto de Empresa, Area of Economic Environment.
  • Handle: RePEc:emp:wpaper:wp04-04
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    File URL: http://latienda.ie.edu/working_papers_economia/WP04-04.pdf
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    References listed on IDEAS

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    Keywords

    Emerging markets; Market microstructure; Stock markets; Trading costs;

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