An empirical investigation of methods to reduce transaction costs

Ted Moorman

Journal of Empirical Finance, 2014, vol. 29, issue C, 230-246

Abstract: Among 37 methods to reduce transaction costs, we recursively choose the best method for next period's investment in each of three portfolio strategies: levered-momentum, zero-cost momentum, and the equally-weighted market. We identify a few of the best methods and offer a framework by which additional methods can be considered. Within our framework, the best methods recapture a substantial amount of wealth and significantly improve risk-adjusted performance, both economically and statistically. Security migration can present a barrier to transaction cost reduction, as improvements occur for zero-cost momentum portfolios invested in all stocks but not for decile-momentum portfolios.

Keywords: Transaction costs reduction; Portfolio performance; Optimization; No-trade region; Geometric distance (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:29:y:2014:i:c:p:230-246

DOI: 10.1016/j.jempfin.2014.09.004

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