Transactions costs and investment style: an inter-exchange analysis of institutional equity trades

Keim, Donald B.; Madhavan, Ananth

doi:10.1016/s0304-405x(97)00031-7

Cited by 584 publications

(469 citation statements)

References 24 publications

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“…This approach dates back at least to Keim and Madhavan (1997), who analyze the transactions costs of a variety of investment styles for $83 billion of trades. A key challenge to this method is that institutional trading is endogenous; traders are particularly aggressive in their trading targets when liquidity is readily available, which in turn imparts a downward bias to estimated cost functions.…”

Section: Related Literaturementioning

confidence: 99%

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What You See Is Not What You Get: The Costs of Trading Market Anomalies

Patton

Weller

2017

SSRN Journal

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Is there a gap between the profitability of a trading strategy "on paper" and that which can be achieved in practice? We answer this question by developing two new techniques to measure the real-world implementation costs of financial market anomalies.The first method extends Fama-MacBeth regressions to compare the on-paper returns to factor exposures with those achieved by mutual funds. The second method estimates average return differences between stocks and mutual funds matched on risk characteristics. Unlike existing approaches, these techniques deliver estimates of implementation costs without estimating parametric microstructure models from trading data or explicitly specifying factor trading strategies. After accounting for implementation costs, typical mutual funds earn low returns to value and no returns to momentum. JEL: G12, G14, G23

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Section: Related Literaturementioning

confidence: 99%

“…Existing approaches generally fall into two categories. The first category entails using proprietary trading data to analyze the transactions costs for a single firm (e.g., Keim and Madhavan (1997), Engle, Ferstenberg, andRussell (2012), andFrazzini, Israel, andMoskowitz (2015)). …”

Section: Introductionmentioning

confidence: 99%

What You See Is Not What You Get: The Costs of Trading Market Anomalies

Patton

Weller

2017

SSRN Journal

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“…Although the primary focus of many theoretical and empirical studies has been on determining factors driving fund flows and how investors are affected by the loads and fees that are charged by the respective mutual funds, the management of flow-induced liquidity and flow-induced selling of target investments on the fund side has also been studied. While Edelen 8 finds that flow-induced trades lower fund performances, Chan and Lakonishok 9 and Keim and Madhavan 10 focus on the fact that trading costs increase with the size of the trades that are necessary to meet unexpected redemptions.…”

Section: Fund Flows Liquidity Risk and Liquidity Costs In Funds (Of mentioning

confidence: 99%

Flow-induced redemption costs in funds of funds

Stein

Rachev

2011

J Deriv Hedge Funds

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“…Trading cost is one of the two important factors which reflect investment performance while the other is the underlying investment strategy of the portfolio manager (Borkovec, 2009;Keim and Madhavan, 1995;Keim, 1999). Execution costs can have a significant impact on investment performance.…”

Section: Trading Costmentioning

confidence: 99%

Dynamic trade execution: a grammatical evolution approach

Cui

Brabazon

O’Neill

2011

IJFMD

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Abstract:Trade execution is concerned with the actual mechanics of buying or selling the desired amount of a financial instrument. Investors wishing to execute large orders face a tradeoff between market impact and opportunity cost. Trade execution strategies are designed to balance out these costs, thereby minimising total trading cost. Despite the importance of optimising the trade execution process, this is difficult to do in practice due to the dynamic nature of markets and due to our imperfect understanding of them. In this paper, we adopt a novel approach, combining an evolutionary methodology whereby we evolve high-quality trade execution strategies, with an agent-based artificial stock market, wherein the evolved strategies are tested. The evolved strategies are found to outperform a series of benchmark strategies and several avenues are suggested for future work.

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Transactions costs and investment style: an inter-exchange analysis of institutional equity trades

Cited by 584 publications

References 24 publications

What You See Is Not What You Get: The Costs of Trading Market Anomalies

What You See Is Not What You Get: The Costs of Trading Market Anomalies

Flow-induced redemption costs in funds of funds

Dynamic trade execution: a grammatical evolution approach

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