Publication Type
Journal Article
Version
acceptedVersion
Publication Date
10-2015
Abstract
This study examines the components of trading costs incurred in trading large and liquid stocks listed on the Stock Exchange of Thailand. We find that aggressive orders pay an immediacy price measured by price impact, whereas executed passive orders gain the immediacy price. We also find a sizable opportunity cost from the unexecuted portion of a limit order that more than offsets the benefit obtained from the partial fulfillment of the order. The total trading cost, which includes price impact and opportunity cost, is positively related to order size and stock price volatility, but negatively associated with firm size, stock price, and stock liquidity. The total trading cost has a U-shaped relation with order aggressiveness. Collectively, our study suggests that, to minimize the total trading cost, the optimal strategy is simply to use a limit order submitted at the best quote.
Keywords
Trading costs, Thailand, Order aggressiveness, Order submission strategy, Implementation shortfall
Discipline
Asian Studies | Finance and Financial Management | Portfolio and Security Analysis
Research Areas
Finance
Publication
International Review of Financial Analysis
Volume
41
First Page
31
Last Page
40
ISSN
1057-5219
Identifier
10.1016/j.irfa.2015.05.008
Publisher
Elsevier
Citation
JENWITTAYAROJE, Nattawut; CHAROENWONG, Charlie; DING, David K.; and YANG, Yung Chiang.
Trading Costs on the Stock Exchange of Thailand. (2015). International Review of Financial Analysis. 41, 31-40.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/4764
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.irfa.2015.05.008
Included in
Asian Studies Commons, Finance and Financial Management Commons, Portfolio and Security Analysis Commons