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Using Information From Trading In Trading And Portfolio Management: Ten Years Later

Leinweber, David (2002) Using Information From Trading In Trading And Portfolio Management: Ten Years Later. Social Science Working Paper, California Institute of Technology , Pasadena, CA. (Unpublished)

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The centerpiece of this paper is a comprehensive analysis of all of the trading by a large US pension fund in 1991. The first version was published in the Summer 1995 issue of the Journal of Investing and later incorporated in the AIMR’s CFA reading. This updated version, requested by the AIMR, reflects the technological and market structure changes of the last ten years, and adds a new empirical analysis of all the 2001 trading by a $7 billion US equity manager. Trading technology has changed in many ways, yet many of the same characteristics of institutional trading are seen just as strongly as they were before. The attention given to large difficult orders still shows in lower than expected trading costs. Small “no-brainer” orders still represent the largest component of overall trading costs. These are precisely the type of costs that modern electronic trading systems are designed to reduce. The idea that trading costs were a substantial drag on performance was a relatively novel in 1991. Today, it is a central concern for many managers, including those profiled here.

Item Type:Report or Paper (Working Paper)
Additional Information:I am grateful to many of my colleagues in the securities industry and academia for their helpful discussion and insights, both in the original and updated versions of this paper. Particular thanks to Ted Aronson, Greg Rogers, Mike Epstein, Ananth Madhavan, David Rothenberg, Richard Rosenblatt, John Dorian, Rob Arnott, Wayne Wagner, Erik Sirri, Andre Perold, Andy Lo, Dale Prouty, Yossi Beinart, John Mulheren, Ray Killian and Evan Schulman. I also thank the institutional brokerage community for all those cheeseballs.
Group:Social Science Working Papers
Subject Keywords:Transaction costs, trading costs, equity markets, stock markets, electronic order working, liquidity, program trading
Series Name:Social Science Working Paper
Record Number:CaltechAUTHORS:20170802-161529767
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:79794
Deposited By: Jacquelyn Bussone
Deposited On:02 Aug 2017 23:47
Last Modified:03 Oct 2019 18:24

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