The Cost of Trading from the Fund Manager's Perspective

34 Pages Posted: 10 Sep 2016

See all articles by Seth Armitage

Seth Armitage

University of Edinburgh - Accounting and Finance

James Clunie

Jupiter Asset Management Ltd.

Gbenga Ibikunle

University of Edinburgh; European Capital Markets Cooperative Research Centre

Date Written: September 7, 2016

Abstract

The cost of executing orders could differ from the cost of trades. We estimate the cost of a fund manager’s orders to trade in shares and contracts for differences (CFDs), using data for 2013-15. We compare directly the effective half-spread (EHS) of an order with the EHS that would be inferred using market data, namely the average EHS of trades in the relevant share, and the quoted half-spread. The typical EHS of an order is approximately same as the cost inferred from market data, while the typical cost of CFDs is slightly higher. However, there is wide variation in the cost of orders, and about one third have a negative spread. The cost of orders by value exceeds the inferred cost, mainly because of a small percentage of orders with very large spreads.

Suggested Citation

Armitage, Seth and Clunie, James and Ibikunle, Gbenga, The Cost of Trading from the Fund Manager's Perspective (September 7, 2016). Available at SSRN: https://ssrn.com/abstract=2836070 or http://dx.doi.org/10.2139/ssrn.2836070

Seth Armitage (Contact Author)

University of Edinburgh - Accounting and Finance ( email )

29 Buccleuch Place
Edinburgh, EH8 9JS
United Kingdom
44 131 650 3794 (Phone)

James Clunie

Jupiter Asset Management Ltd. ( email )

1 Grosvenor Place
London, SW1X 7JJ
United Kingdom

Gbenga Ibikunle

University of Edinburgh ( email )

Old College
South Bridge
Edinburgh, Scotland EH8 9JY
United Kingdom

European Capital Markets Cooperative Research Centre ( email )

Viale Pidaro 42
Pescara, 65121
Italy

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
59
Abstract Views
663
rank
440,605
PlumX Metrics