Measuring Transaction Costs in the Absence of Timestamps

Filip Zikes
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Filip Zikes: https://www.federalreserve.gov/econres/filip-zikes.htm

No 2017-045, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper develops measures of transaction costs in the absence of transaction timestamps and information about who initiates transactions, which are data limitations that often arise in studies of over-the-counter markets. I propose new measures of the effective spread and study the performance of all estimators analytically, in simulations, and present an empirical illustration with small-cap stocks for the 2005-2014 period. My theoretical, simulation, and empirical results provide new insights into measuring transaction costs and may help guide future empirical work.

Keywords: Effective spread; Simulated method of moments; Time-varying estimation; Transaction costs (search for similar items in EconPapers)
JEL-codes: C14 C15 G20 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2017-04-06
New Economics Papers: this item is included in nep-mst
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2017-45

DOI: 10.17016/FEDS.2017.045

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