Title

Performance of Institutional Trading Desks: An Analysis of Persistence in Trading Cost

Publication Date

9-23-2008

Abstract

Using a proprietary dataset of institutional investors’ equity transactions, we document that institutional trading desks can sustain relative performance over adjacent periods. We find that trading desk skill is positively correlated with the performance of the institution’s traded portfolio, suggesting that institutions that invest resources in developing execution abilities also invest in generating superior investment ideas. Although some brokers can deliver better executions consistently over time, our analysis suggests that trading desk skill is not limited to a selection of better brokers. We conclude that the trade implementation process is economically important and can contribute to relative portfolio performance.

Document Type

Article

Keywords

Trading cost, Buy-side Institution, Trading Performance, Broker, Mutual Fund, Alpha

Disciplines

Finance

DOI

10.2139/ssrn.1272040

Source

SMU Cox: Finance (Topic)

Language

English

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