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

See all articles by Carole Comerton-Forde

Carole Comerton-Forde

UNSW Business School; Financial Research Network (FIRN)

David R. Gallagher

Rozetta Institute

Jumana Nahhas

The University of Sydney

Terry S. Walter

University of Sydney; University of Technology, Sydney - School of Finance and Economics; Financial Research Network (FIRN)

Multiple version iconThere are 2 versions of this paper

Date Written: December 1, 2010

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.

Keywords: price impact, small-cap funds, transaction costs

JEL Classification: G14, G19

Suggested Citation

Comerton-Forde, Carole and Gallagher, David R. and Nahhas, Jumana and Walter, Terry Stirling, Transaction Costs and Institutional Trading in Small-Cap Equity Funds (December 1, 2010). Australian Journal of Management, Vol. 35, No. 3, pp. 313-327, 2010, Available at SSRN: https://ssrn.com/abstract=1800808

Carole Comerton-Forde (Contact Author)

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

David R. Gallagher

Rozetta Institute ( email )

Sydney

Jumana Nahhas

The University of Sydney ( email )

University of Sydney
Sydney, NSW 2006
Australia

Terry Stirling Walter

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

University of Technology, Sydney - School of Finance and Economics ( email )

Haymarket
Sydney, NSW 2007
Australia
+61 2 9514 3860 (Phone)
+61 2 9514 7711 (Fax)

HOME PAGE: http://datasearch.uts.edu.au/business/finance/staff/StaffDetails.cfm?UnitStaffId=5373

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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