Presidential Address: Friction

2000-08-01articleThe Journal of Finance681 citationsclosed

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Financial Markets and Investment Strategies Corporate Finance and Governance Financial Analysis and Corporate Governance

Abstract

The sources of trading friction are studied, and simple, robust empirical measures of friction are provided. Seven distinct measures of trading friction are computed from transactions data for 1,706 NYSE/AMSE stocks and 2,184 Nasdaq stocks. The measures provide insights into the magnitude of trading costs, the importance of informational versus real frictions, and the role of market structure. The degree to which the various measures are associated with each other and with trading characteristics of stocks is examined.

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References

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