Transaction Costs

With rising turnover in institutional portfolios, investment managers are paying increasing attention to transaction costs. Some insight into managing costs are provided in an approach that assumes trading is a process, not an event. In the process, there are 3 actors: portfolio manager, in-house tr...

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Bibliographic Details
Published in:Journal of portfolio management 2001-01, Vol.27 (2), p.65-74
Main Authors: Berkowitz, Stephen A., Logue, Dennis E.
Format: Article
Language:English
Subjects:
Cooperation
Costs
Equity
Institutional investments
Investment advisors
Investment policy
Opportunity costs
Portfolio management
Prices
Profits
Securities trading
Statistical analysis
Stock brokers
Stock exchanges
Studies
Citations: Items that cite this one
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Description
Summary:With rising turnover in institutional portfolios, investment managers are paying increasing attention to transaction costs. Some insight into managing costs are provided in an approach that assumes trading is a process, not an event. In the process, there are 3 actors: portfolio manager, in-house trader, and broker, each with its own period of discretion. Costs of transacting should be attributed to the different actors according only to their periods of discretion. High-turnover portfolios should invest in systems that would allow estimation of the costs attributable to each actor's decisions. Ways this might be done are illustrated.
ISSN:0095-4918
2168-8656
DOI:10.3905/jpm.2001.319793