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Article

How Do Trading Costs Vary Across the Day? A Note on the Innovative XLM Measure for Small Caps at the Frankfurt
Stock Exchange

Christiane Goodfellow, Dirk Schiereck and Tatjana Verrier
The Journal of Trading Fall 2010, 5 (4) 78-87; DOI: https://doi.org/10.3905/jot.2010.5.4.078
Christiane Goodfellow
is an assistant lecturer at Westfälische Wilhelms-University Münster in Münster, Germany.
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  • For correspondence: christiane.goodfellow@wiwi.uni-muenster.de
Dirk Schiereck
is a professor in the department of business, economics, and law at Tech University Darmstadt in Darmstadt, Germany.
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  • For correspondence: Schiereck@bwl.tu-darmstadt.de
Tatjana Verrier
is a research assistant in the department of finance, accounting, and real estate at the European Business School (EBS) in Oestrich-Winkel, Germany.
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  • For correspondence: tverrier@googlemail.com
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Abstract

This article provides empirical evidence on the intraday pattern of trading costs for German small-cap stocks in the electronic trading system Xetra at the Frankfurt Stock Exchange. Theoretical papers draw ambiguous conclusions as to whether trading costs should increase or decrease with concentrated liquidity, and only very limited empirical evidence is available on intraday execution costs for stock trading in Germany. The authors investigate the XLM variable, which is a more comprehensive measure of trading costs than conventional indicators, such as the bid–ask spread or trading volume. The empirical evidence for the TecDAX stocks under investigation suggests a reverse J-shaped intraday profile for execution costs. Thus, trading is most expensive in the first 30 minutes after Xetra opens, and it is cheapest at the time when the NYSE starts trading. The authors conclude that cross-border integration of stock exchanges fosters market quality.

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The Journal of Trading: 5 (4)
The Journal of Trading
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Fall 2010
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How Do Trading Costs Vary Across the Day? A Note on the Innovative XLM Measure for Small Caps at the Frankfurt
Stock Exchange
Christiane Goodfellow, Dirk Schiereck, Tatjana Verrier
The Journal of Trading Sep 2010, 5 (4) 78-87; DOI: 10.3905/jot.2010.5.4.078

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How Do Trading Costs Vary Across the Day? A Note on the Innovative XLM Measure for Small Caps at the Frankfurt
Stock Exchange
Christiane Goodfellow, Dirk Schiereck, Tatjana Verrier
The Journal of Trading Sep 2010, 5 (4) 78-87; DOI: 10.3905/jot.2010.5.4.078
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  • Article
    • Abstract
    • TESTABLE HYPOTHESES
    • SCREEN-BASED STOCK TRADING IN GERMANY VIA XETRA
    • METHODOLOGY AND DATA
    • EMPIRICAL RESULTS
    • CONCLUSIONS
    • ENDNOTES
    • REFERENCES
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