Abstract

http://ssrn.com/abstract=1123362
 


 



Re-Examining the Hidden Costs of the Stop-Loss


Wilson Ma


University of Washington - Michael G. Foster School of Business; BlackRock

Guy Morita


University of Washington - Michael G. Foster School of Business

Kira Detko


University of Washington - Michael G. Foster School of Business

04/10/2008


Abstract:     
In this paper, we present general implications of the impact of stop-losses to future returns. The use of stop-losses change return distributions, but not in the way that one would typically expect. We find that while stop-losses can reduce position volatility, hidden costs offset perceived benefits in terms of altering future returns. Use of both stop-losses and profit-taking stops separately or in conjunction offer no statistically significant difference in expected return but have a meaningful impact in returns with drift, as the expected return converges to that of the underlying.

Number of Pages in PDF File: 31

Keywords: stop-loss, stoploss, hidden costs, hiddencosts, costs, benefits, risk, wilson ma, kira detko, guy morita

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Date posted: April 22, 2008  

Suggested Citation

Ma, Wilson and Morita, Guy and Detko, Kira, Re-Examining the Hidden Costs of the Stop-Loss (04/10/2008). Available at SSRN: http://ssrn.com/abstract=1123362 or http://dx.doi.org/10.2139/ssrn.1123362

Contact Information

Wilson Ma (Contact Author)
University of Washington - Michael G. Foster School of Business ( email )
Box 353200
Seattle, WA 98195-3200
United States
BlackRock ( email )
55 East 52nd Street
New York City, NY 10055
United States
Guy Morita
University of Washington - Michael G. Foster School of Business ( email )
Box 353200
Seattle, WA 98195-3200
United States
Kira Detko
University of Washington - Michael G. Foster School of Business ( email )
Box 353200
Seattle, WA 98195-3200
United States
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