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What Factors Increase the Risk of Incurring High Market Impact Costs?

[journal article]

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

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Please use the following Persistent Identifier (PID) to cite this document:http://nbn-resolving.de/urn:nbn:de:0168-ssoar-241715

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Abstract This paper 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.
Publication Year 2009
Page/Pages p. 369-387
Journal Applied Economics, 42 (2009) 3
DOI http://dx.doi.org/10.1080/00036840701604461
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)