The NYSE Opening Mechanism And Portfolio Trading
نویسنده
چکیده
In principle, implementation of portfolio investment strategies through market orders at the NYSE open would be problematic because of execution price uncertainty. This paper measures the impact, by comparing the actual value at the end of the trading day against the value one would have obtained if it were possible to observe opening prices when submitting orders. For positively weighted portfolios of twenty-five securities, for instance, the one-year cumulative risk of daily portfolio trading at the NYSE open is found to be 7 cents per dollar invested. This is only one-third of the risk of holding a typical security overnight during the year. In contrast to the latter, however, execution price risk appears not to be compensated.
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