The Implementation Shortfall of Institutional Equity Trades

This paper is the first to analyze the price effects of equity trading by a pension fund. We find that, on average, these effects are nonðnegligible: 20 basis points for buys and 26 basis points for sells. Furðthermore, we show that (relative) trade size and market capitalization, commonly found to play an important role, have only limited influðence on the price impact of a trade. The most important determinants of the price effect are investment style, trade type (agency, single, or principal), momentum, stock price volatility, and trading venue.