Building and Evaluating a Transaction Cost Model: A Primer

摘要: It is well known that incorporating transaction costs into the portfolio construction process important and often leads to different investment decisions and, ultimately, performances. However, it obviously not sufficient just blindly pick any arbitrary cost model available. A bad can do more harm than good if does represent reality in terms of “true” average realized costs. Consequently, one uses a model, crucial be aware sources costs, know which parts/components are modeled not, how defined, estimated, most importantly, tested calibrated. This article sheds light on these considerations discusses existing challenges along with possible remedies.