Trading costs and execution strategies in emerging markets

Publisher:
John Wiley & Sons Ltd
Publication Type:
Chapter
Citation:
Market microstructure in emerging and developed markets, 2013, 1st, pp. 425 - 444
Issue Date:
2013-01
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This chapter discusses the high trading costs that can arise in emerging markets and considers ways to ameliorate those transaction costs. Transaction costs might be high in emerging markets due to factors including thin trading, poor regulation, and limits to direct market access or algorithmic trading. A portfolio manager or trader must consider these costs when constructing and rebalancing a portfolio or when executing a trade. The chapter considers several ways that traders can ameliorate transaction costs when executing a larger order. It also discusses how a portfolio manager could take an approach to rebalancing that recognizes the potentially large costs involved in rebalancing.
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