סמינר במימון -חשבונאות

Menachem (Meny) Abudy¹ and Avi Wohl²

Abstract:

 Using a unique database from the Tel AvivStock Exchange that includes trader identification, we are able to identify trades that originate from liquidity needs. Specifically, we definea transaction where the seller held the stock for more than a year and did not buy any asset around this transaction as a "liquidity selling" transaction. We measure the execution costs of these transactions using closing prices as benchmarks. The average execution costs are lower than the effective spreads, partly because in 39% of the cases our sellers use limit orders. In a cross-section analysis, we find that the stocks' execution costs are explained more accurately by bid-ask spread measures and less accurately by annual volume. The price impact measures based on intraday data are less accurate and measures based on daily returns do not explain execution costs. In a time series analysis, Amihud's (2002) ILLIQ is a good explanatory measure and it adds to the explanatory power of the bid-askspread measures.