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stock imageMethodology
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methodology
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There is no perfect methodology to measure market impact. Trades are executed for many different reasons and they are executed in many different ways.

In many cases the trade data which is available for analysis does not contain time stamps. For example, trade data from pension funds, which comes from their custody banks, does not have time stamps. When time stamps are not available, pension funds and investment managers compare their execution to the volume weighted average price of the stock on the day of the trade.

If time stamps are available to indicate the time of order creation, arrival at the trading desk, release to the broker and time of execution, then interval volume weighted averages and implementation shortfall measurements can be calculated and compared to appropriate universes.

Opportunity costs can be calculated with whatever methodology makes sense to investment managers.

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The Universe
spacer The Elkins/McSherry Universe is a compilation of actual trade data gathered from institutional investors. This data covers over 24 million trades, $7.2 trillion worth of principal and 375 billion shares of trading representing 1500 investment managers and 2000 brokers worldwide. Elkins/McSherry uses these data to create universes with which we compare institutional commissions, fees and market impact.
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The Database
spacer On a daily basis we store every trade that is executed in 47 countries and each trade is time stamped to the closest second. This data is used to calculate average prices, volume weighted average prices, and time stamped VWAP’s for comparison purposes.
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Trade Cycle Analysis
spacer Elkins/McSherry will take you beyond the basic VWAP when analyzing your trading costs. Our time-stamp capabilities allow us to analyze your trade down to the exact second in 47 countries worldwide. This flexibility allows us to measure each step of the trading cycle – from the portfolio manager decision to the closing bell.
Trade Cycle Chart
spacer In addition to our trade cycle measurement, Elkins/McSherry can offer reporting on specific scenarios including: unfilled orders, program trading, pre and post trade analysis and portfolio transition costs. We also provide customized universes to illustrate the most accurate cost comparisons based on style and method of trading.

 

 

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