I investigate the trading decisions of a large institutional liquidity trader by using a detailed data set from a transition management firm. The data set contains records for all trades of transitions completed between January 2008 and September 2008. Effective execution involves a trade off between trading patiently over time to minimize price impact costs and trading quickly to avoid opportunity costs due to price volatility. I estimate a model of transition duration that accounts for volatility, an order's percentage of average daily volume, and the bid--ask spread to uncover the firm's strategy of how quicklyto trade. To understand the firm's intermediate trading decisions, I estimate a vector autoregression that summarizes the dynamic relationship of volatility, trading volume, the bid--ask spread, and order type and order duration. My analysis suggests that the firm behaves strategically to minimize the total costs of trading.
| Identifer | oai:union.ndltd.org:arizona.edu/oai:arizona.openrepository.com:10150/195279 |
| Date | January 2010 |
| Creators | Brough, Tyler Jon |
| Contributors | Lamoureux, Chris, Lamoureux, Chris, Dyl, Ed, Kelley, Eric, Gowrisankaran, Gautam |
| Publisher | The University of Arizona. |
| Source Sets | University of Arizona |
| Language | English |
| Detected Language | English |
| Type | text, Electronic Dissertation |
| Rights | Copyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author. |
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