Stock Returns with Price Impact

Alfred Ka Chun Ma and Xiayun Sun

Journal of Applied Finance & Banking, 2013, vol. 3, issue 4, 16

Abstract: In this paper, we study the stock returns for large trades with price impact. We use the daily changes in volume-weighted average price (VWAP) as a proxy of the returns for institutional investors. This return is then compared statistically to the daily return using closing price. Using a panel data of NYSE/AMEX stocks, we find a fixed effect contributing to the spread between them and it can be interpreted as an unbiased ex post estimate of price impact.

Date: 2013
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