AgPa #29: Cost-Mitigation Techniques
Comparing Cost-Mitigation Techniques (2019)
Robert Novy-Marx, Mihail Velikov
Financial Analysts Journal 75(1), 85-102, URL/SSRN
This week’s AGNOSTIC Paper examines three techniques to mitigate trading costs of systematic equity strategies and compares them by after-cost performance. The empirical evidence clearly speaks for the application of more sophisticated trading rules (Technique #3)…
- Trading costs decreased but are still important
- Technique #1: focus on “cheap-to-trade” securities
- Technique #2: rebalance less frequently
- Technique #3: create better trading rules
- Value- versus equal-weighted portfolios