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The Practical Implications and Benefits of Trade Cost Analysis Dr Kin Yu: Citigroup Dr Kin Yu, Head of Global Portfolio Trading Strategies, Citigroup.

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Presentation on theme: "The Practical Implications and Benefits of Trade Cost Analysis Dr Kin Yu: Citigroup Dr Kin Yu, Head of Global Portfolio Trading Strategies, Citigroup."— Presentation transcript:

1 The Practical Implications and Benefits of Trade Cost Analysis Dr Kin Yu: Citigroup Dr Kin Yu, Head of Global Portfolio Trading Strategies, Citigroup

2 Alternative Execution GLOBAL PORTFOLIO TRADING STRATEGIES Transaction cost analysis oSophisticated pre- and post-trade transaction cost analysis tool oIndependent oTransparent oTimely oMultiple benchmark comparisons oGlobal equities oWeb based interface

3 Alternative Execution GLOBAL PORTFOLIO TRADING STRATEGIES The model oTheoretical Model: simple and easy to understand oEmpirical models: A new approach oSeparate impact from permanent to temporary oAbility to determine time to fill oNo classification errors as buy / sell is known oEmpirically tested oGood for both portfolios and single securities oIndependently refereed

4 Alternative Execution GLOBAL PORTFOLIO TRADING STRATEGIES The factors oSignificant factors oFactors tested but not retained oSize of trade oAverage daily volume oStock bid-ask spread oStock volatility oMarket cap / shares outstanding oMomentum oMarket adjustment oBuy / Sell

5 Alternative Execution GLOBAL PORTFOLIO TRADING STRATEGIES Bid-Ask spreads

6 Alternative Execution GLOBAL PORTFOLIO TRADING STRATEGIES Intraday profiles

7 Alternative Execution GLOBAL PORTFOLIO TRADING STRATEGIES Examples oBid-ask is a significant part of the impact calculations oLiquidity is more important for stocks with large bid-ask spreads oDoes a higher spread lead to higher impact cost?

8 Alternative Execution GLOBAL PORTFOLIO TRADING STRATEGIES BECS: The application

9 Alternative Execution GLOBAL PORTFOLIO TRADING STRATEGIES BECS: Pre-Trade

10 Alternative Execution GLOBAL PORTFOLIO TRADING STRATEGIES BECS: Pre-Trade

11 Alternative Execution GLOBAL PORTFOLIO TRADING STRATEGIES BECS: Pre-Trade

12 Alternative Execution GLOBAL PORTFOLIO TRADING STRATEGIES BECS: Pre-Trade

13 Alternative Execution GLOBAL PORTFOLIO TRADING STRATEGIES BECS: Pre-Trade

14 Alternative Execution GLOBAL PORTFOLIO TRADING STRATEGIES BECS: Pre-Trade

15 Alternative Execution GLOBAL PORTFOLIO TRADING STRATEGIES BECS: Post-Trade

16 Alternative Execution GLOBAL PORTFOLIO TRADING STRATEGIES BECS: Post-Trade

17 Alternative Execution GLOBAL PORTFOLIO TRADING STRATEGIES BECS: Post-Trade

18 Alternative Execution GLOBAL PORTFOLIO TRADING STRATEGIES BECS: Post-Trade

19 Alternative Execution GLOBAL PORTFOLIO TRADING STRATEGIES Summary oSophisticated pre and post-trade transaction cost analysis tool oSignificant new impact cost model for global equities oDynamic post trade analysis with drill down facility oTrade scheduling oImpact cost for different benchmarks

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