Skip to main content

Main menu

  • Home
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About the JOT
    • Editorial Board
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Follow PMR on LinkedIn
  • Follow PMR on Twitter

User menu

  • Sample our Content
  • Subscribe Now
  • Log in

Search

  • ADVANCED SEARCH: Discover more content by journal, author or time frame
The Journal of Trading
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Sample our Content
  • Subscribe Now
  • Log in
The Journal of Trading

The Journal of Trading

ADVANCED SEARCH: Discover more content by journal, author or time frame

  • Home
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About the JOT
    • Editorial Board
  • Follow PMR on LinkedIn
  • Follow PMR on Twitter
Primary Article

The Magic of Hindsight

Creating a Post-Trade Transaction Cost Estimate Based on Realized Market Conditions

Milan Borkovec and Hans G. Heidle
The Journal of Trading Fall 2007, 2 (4) 34-49; DOI: https://doi.org/10.3905/jot.2007.694827
Milan Borkovec
Head of the Financial Engineering Group at Investment Technology Group, Inc., in Boston, MA.
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • For correspondence: milan.borkovec@itg.com
Hans G. Heidle
Manager of Financial Engineering's Pre-Trade Analytics Group at Investment Technology Group, Inc., in Boston, MA.
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • For correspondence: hans.heidle@itg.com
  • Article
  • Info & Metrics
  • PDF (Subscribers Only)
Loading

Abstract

The crucial assumption in most pre-trade transaction cost models is market neutrality. Consequently, expected costs for these models are entirely based on one's own trading strategy and direct market impact. Market effects due to other market participants are generally completely ignored. This article describes how to improve transaction cost estimates (benchmarks) for post-trade analysis. After deriving the expected transaction costs from a specific pre-trade model, we incorporate the general market effects at the time when the trades actually took place. The proposed model incorporates market returns, spread variables, and trade imbalances. The model also allows for the decomposition of the cost of a transaction into two components: the cost due to one's own trading and the cost due to general market effects. The framework is applied to a proprietary pre-trade transaction cost model.

  • © 2007 Pageant Media Ltd

Don’t have access? Register today to begin unrestricted access to our database of research.

Log in using your username and password

Forgot your user name or password?
PreviousNext
Back to top

Explore our content to discover more relevant research

  • By topic
  • Across journals
  • From the experts
  • Monthly highlights
  • Special collections

In this issue

The Journal of Trading
Vol. 2, Issue 4
Fall 2007
  • Table of Contents
  • Index by author
Download PDF
Article Alerts
Sign In to Email Alerts with your Email Address
Email Article

Thank you for your interest in spreading the word on The Journal of Trading.

NOTE: We only request your email address so that the person you are recommending the page to knows that you wanted them to see it, and that it is not junk mail. We do not capture any email address.

Enter multiple addresses on separate lines or separate them with commas.
The Magic of Hindsight
(Your Name) has sent you a message from The Journal of Trading
(Your Name) thought you would like to see the The Journal of Trading web site.
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
Citation Tools
The Magic of Hindsight
Milan Borkovec, Hans G. Heidle
The Journal of Trading Sep 2007, 2 (4) 34-49; DOI: 10.3905/jot.2007.694827

Citation Manager Formats

  • BibTeX
  • Bookends
  • EasyBib
  • EndNote (tagged)
  • EndNote 8 (xml)
  • Medlars
  • Mendeley
  • Papers
  • RefWorks Tagged
  • Ref Manager
  • RIS
  • Zotero
Save To My Folders
Share
The Magic of Hindsight
Milan Borkovec, Hans G. Heidle
The Journal of Trading Sep 2007, 2 (4) 34-49; DOI: 10.3905/jot.2007.694827
del.icio.us logo Digg logo Reddit logo Twitter logo CiteULike logo Facebook logo Google logo LinkedIn logo Mendeley logo
Tweet Widget Facebook Like LinkedIn logo

Jump to section

  • Article
  • Info & Metrics
  • PDF (Subscribers Only)
  • PDF (Subscribers Only)

Similar Articles

Cited By...

  • Are Expected Costs and Returns Identical Twins? Decoupling Slippage from Momentum over Shorter Horizons
  • Google Scholar

More in this TOC Section

  • Algorithmic Trading in Turbulent Markets
  • Demystifying the Relationship between Trading-Level and Portfolio-Level Tracking Error
  • Dual Traders in Fully Anonymous Stock Markets, Iceberg Orders, and Liqudity Provision
Show more Primary Article
LONDON
One London Wall, London, EC2Y 5EA
United Kingdom
+44 207 139 1600
 
NEW YORK
41 Madison Avenue, New York, NY 10010
USA
+1 646 931 9045
pm-research@pageantmedia.com
 

Stay Connected

  • Follow PMR on LinkedIn
  • Follow PMR on Twitter

MORE FROM PMR

  • Home
  • Awards
  • Investment Guides
  • Videos
  • About PMR

INFORMATION FOR

  • Academics
  • Agents
  • Authors
  • Content Usage Terms

GET INVOLVED

  • Advertise
  • Publish
  • Article Licensing
  • Contact Us
  • Subscribe Now
  • Log In
  • Update your profile
  • Give us your feedback

© 2021 Pageant Media Ltd | All Rights Reserved | ISSN: 1559-3967 | E-ISSN: 2168-8427

  • Site Map
  • Terms & Conditions
  • Privacy Policy
  • Cookies