Transaction Costs and Institutional Trading in Small-Cap Equity Funds
Australian Journal of Management, Vol. 35, No. 3, pp. 313-327, 2010
Posted: 2 Apr 2011
Date Written: December 1, 2010
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.
Keywords: price impact, small-cap funds, transaction costs
JEL Classification: G14, G19
Suggested Citation: Suggested Citation