Transaction Costs and Institutional Trading in Small-Cap Equity Funds

32 Pages Posted: 25 Oct 2006

See all articles by Carole Comerton-Forde

Carole Comerton-Forde

UNSW Business School; Financial Research Network (FIRN)

Terry S. Walter

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

Jumana Nahhas

The University of Sydney

David R. Gallagher

Rozetta Institute

Multiple version iconThere are 2 versions of this paper

Date Written: October 2006

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 0.67 (-0.62) percent for purchases (sales). This is significantly larger than costs reported in prior research. No significant asymmetries in the magnitude or direction of price impacts are observed. Consistent with existing literature, trade duration, fund investment style and manager identity are determinants of price impact. Analysis of a new variable, fund status, reveals that funds which are closed to new money incur significantly lower price impacts on sales compared to funds which remain open.

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

JEL Classification: G14, G19

Suggested Citation

Comerton-Forde, Carole and Walter, Terry Stirling and Nahhas, Jumana and Gallagher, David R., Transaction Costs and Institutional Trading in Small-Cap Equity Funds (October 2006). Available at SSRN: https://ssrn.com/abstract=939665 or http://dx.doi.org/10.2139/ssrn.939665

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

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

Jumana Nahhas

The University of Sydney ( email )

University of Sydney
Sydney, NSW 2006
Australia

David R. Gallagher

Rozetta Institute ( email )

Sydney

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