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Transaction costs and institutional trading in small-cap equity funds

Journal Article


Abstract


  • This paper examines the magnitude and determinants of trading costs for small-cap funds in Australia. The total price impact for these funds is 0.99% (-0.34%) for purchases (sales). This is considerably larger than costs reported in prior literature. Both purchases and sales exhibit price continuations after the trade package, consistent with an information effect. Although we do not observe the directional asymmetry typically shown in the literature, the magnitude of the total and permanent effects for purchases is larger than for sales. We also show that price impact is related to fund inflows and outflows.

Authors


  •   Comerton-Forde, Carole (external author)
  •   Gallagher, David R. (external author)
  •   Nahhas, Jumana (external author)
  •   Walter, Terry S.

Publication Date


  • 2010

Citation


  • Comerton-Forde, C., Gallagher, D. R., Nahhas, J. & Walter, T. S. (2010). Transaction costs and institutional trading in small-cap equity funds. Australian Journal of Management, 35 (3), 313-327.

Scopus Eid


  • 2-s2.0-79251474962

Ro Metadata Url


  • http://ro.uow.edu.au/buspapers/1196

Number Of Pages


  • 14

Start Page


  • 313

End Page


  • 327

Volume


  • 35

Issue


  • 3

Abstract


  • This paper examines the magnitude and determinants of trading costs for small-cap funds in Australia. The total price impact for these funds is 0.99% (-0.34%) for purchases (sales). This is considerably larger than costs reported in prior literature. Both purchases and sales exhibit price continuations after the trade package, consistent with an information effect. Although we do not observe the directional asymmetry typically shown in the literature, the magnitude of the total and permanent effects for purchases is larger than for sales. We also show that price impact is related to fund inflows and outflows.

Authors


  •   Comerton-Forde, Carole (external author)
  •   Gallagher, David R. (external author)
  •   Nahhas, Jumana (external author)
  •   Walter, Terry S.

Publication Date


  • 2010

Citation


  • Comerton-Forde, C., Gallagher, D. R., Nahhas, J. & Walter, T. S. (2010). Transaction costs and institutional trading in small-cap equity funds. Australian Journal of Management, 35 (3), 313-327.

Scopus Eid


  • 2-s2.0-79251474962

Ro Metadata Url


  • http://ro.uow.edu.au/buspapers/1196

Number Of Pages


  • 14

Start Page


  • 313

End Page


  • 327

Volume


  • 35

Issue


  • 3