Market Impact Costs of Institutional Equity Trades

Jacob Bikker (), Pieter Jelle van der Sluis () and Laura Spierdijk

DNB Working Papers from Netherlands Central Bank, Research Department

Abstract: 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.

Keywords: market impact costs; trading costs; price effects; institutional equity trading; pension funds (search for similar items in EconPapers)
JEL-codes: E32 G14 G23 G28 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-fin and nep-fmk
Date: 2004-06
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Related works:
Working Paper: Market Impact Costs of Institutional Equity Trades (2004)
Journal Article: Market impact costs of institutional equity trades (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:dnb:dnbwpp:001

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