April 2017

Measuring Transaction Costs in the Absence of Timestamps

Filip Zikes


This paper develops measures of transaction costs in the absence of transaction timestamps and information about who initiates transactions, which are data limitations that often arise in studies of over-the-counter markets. I propose new measures of the effective spread and study the performance of all estimators analytically, in simulations, and present an empirical illustration with small-cap stocks for the 2005-2014 period. My theoretical, simulation, and empirical results provide new insights into measuring transaction costs and may help guide future empirical work.

Accessible materials (.zip)

Keywords: Effective spread, simulated method of moments, time-varying estimation, transaction costs

DOI: https://doi.org/10.17016/FEDS.2017.045

PDF: Full Paper

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Last Update: January 09, 2020