Liquidity Clienteles : Transaction Costs and Investment Decisions of Individual Investors

Theoretical papers link the liquidity premium to the optimal trading decisions of investors facing transaction costs. In particular, investors' holding periods determine how transaction costs are amortized and priced in asset returns. Using a...

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Bibliographic Details
Main Author: Anginer, Deniz
Format: Policy Research Working Paper
Language:English
Published: 2012
Subjects:
BID
BPS
GDP
TAX
Online Access:http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100526133302
http://hdl.handle.net/10986/3803
id okr-10986-3803
recordtype oai_dc
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic ACCOUNTING
ADVERSE EFFECTS
ADVERSE SELECTION
AGGREGATE MARKET
AMOUNT OF CAPITAL
ASSET PRICES
ASSET PRICING
ASSET RETURNS
ASYMMETRIC INFORMATION
BASIS POINTS
BENCHMARKS
BID
BOOK VALUE
BOOK-TO-MARKET
BPS
BROKERAGE
BROKERAGE HOUSE
CAPITAL MARKET
CHECKS
CLOSING PRICE
CLOSING PRICES
COMMON MARKET
COMMON STOCK
COMMON STOCKS
CONSUMER FINANCES
DECISION MAKING
DEMOGRAPHIC
DISCOUNT BROKERAGE
DIVERSIFIED PORTFOLIOS
DUMMY VARIABLE
DUMMY VARIABLES
ECONOMIC THEORY
EFFICIENT MARKET
EQUILIBRIUM
EQUITIES
EQUITY INVESTMENTS
EQUITY MARKETS
EQUITY PORTFOLIO
EXCESS RETURN
EXCESS RETURNS
EXTERNAL INVESTORS
FINANCES
FINANCIAL MARKETS
FINANCIAL SECURITIES
FINANCIAL SERVICES
FINANCIAL STUDIES
FOREIGN ASSET
FOREIGN MUTUAL FUNDS
FOREIGN STOCKS
GDP
GROUP OF INVESTORS
GROUPS OF INVESTORS
HOLDING
HOLDING PERIOD
HOLDING PERIODS
HOLDINGS
HOUSEHOLD INCOME
ILLIQUID ASSETS
ILLIQUID SECURITIES
ILLIQUID SECURITY
ILLIQUIDITY
INCOME SHOCKS
INCOMES
INDIVIDUAL INVESTOR
INDIVIDUAL INVESTORS
INDIVIDUAL SECURITIES
INSTITUTIONAL INVESTORS
INTEREST RATE
INTERNATIONAL BANK
INVENTORIES
INVENTORY
INVESTING
INVESTMENT ADVISORS
INVESTMENT DECISIONS
INVESTMENT HORIZONS
INVESTMENT OPPORTUNITIES
INVESTMENT PERFORMANCE
INVESTMENT POLICIES
INVESTOR BEHAVIOR
INVESTOR HOLDING
INVESTOR LOSSES
INVESTOR RATIONALITY
INVESTOR SENTIMENT
INVESTOR WELFARE
LARGE CAP
LARGE CAP STOCK
LIQUID ASSETS
LIQUID STOCKS
LIQUIDITY
LIQUIDITY PREMIUM
LIQUIDITY RISK
LONG-TERM INVESTORS
MARGINAL UTILITY
MARKET CAPITALIZATION
MARKET EQUILIBRIUM
MARKET LEVEL
MARKET LIQUIDITY
MARKET MAKER
MARKET MAKERS
MARKET MOVEMENTS
MARKET PARTICIPANTS
MARKET PORTFOLIO
MARKET RETURN
MARKET SUPPLY
MARKET VOLATILITY
MUTUAL FUND
MUTUAL FUND FLOWS
MUTUAL FUND PERFORMANCE
MUTUAL FUNDS
NET RETURN
NET RETURNS
NOISE TRADERS
NUMBER OF INVESTOR
NUMBER OF INVESTORS
NUMBER OF SHARES
ORDER FLOW
ORDER FLOWS
POLITICAL ECONOMY
PORTFOLIO
PORTFOLIO DIVERSIFICATION
PORTFOLIO PERFORMANCE
PORTFOLIO POSITIONS
PORTFOLIOS
POSITIVE ABNORMAL RETURNS
PREDICTABILITY
PREVIOUS STUDIES
PRICE FLUCTUATIONS
PRIVATE SECTOR DEVELOPMENT
PUBLIC POLICY
PURCHASE PRICE
PURCHASING
RATE OF RETURN
RAW RETURNS
RETAIL
RETAIL INVESTOR
RETAIL INVESTORS
RETURN
RETURNS
RISK EXPOSURE
RISK NEUTRAL
ROBUSTNESS CHECKS
SALE
SALES
SECURITIES TRANSACTION
SECURITIES TRANSACTIONS
SECURITY HOLDINGS
SECURITY PRICES
SHORT-TERM RETURNS
SHORT-TERM TRADING
SOPHISTICATED INVESTORS
SPREAD
STOCK CHARACTERISTICS
STOCK HOLDINGS
STOCK MARKET
STOCK PRICE
STOCK RETURNS
STOCKS
SUPPLIERS
TAX
TAX POLICY
TERM STRUCTURE OF INTEREST RATES
TIME HORIZON
TRADES
TRADING
TRADING ACTIVITY
TRADING COSTS
TRADING DAY
TRADING DAYS
TRADING VOLUME
TRANSACTION
TRANSACTION COST
TRANSACTION COSTS
TRANSACTION PRICE
TRANSACTIONS COSTS
TURNOVER
UNSOPHISTICATED INVESTOR
VOLATILITY
WEALTH
spellingShingle ACCOUNTING
ADVERSE EFFECTS
ADVERSE SELECTION
AGGREGATE MARKET
AMOUNT OF CAPITAL
ASSET PRICES
ASSET PRICING
ASSET RETURNS
ASYMMETRIC INFORMATION
BASIS POINTS
BENCHMARKS
BID
BOOK VALUE
BOOK-TO-MARKET
BPS
BROKERAGE
BROKERAGE HOUSE
CAPITAL MARKET
CHECKS
CLOSING PRICE
CLOSING PRICES
COMMON MARKET
COMMON STOCK
COMMON STOCKS
CONSUMER FINANCES
DECISION MAKING
DEMOGRAPHIC
DISCOUNT BROKERAGE
DIVERSIFIED PORTFOLIOS
DUMMY VARIABLE
DUMMY VARIABLES
ECONOMIC THEORY
EFFICIENT MARKET
EQUILIBRIUM
EQUITIES
EQUITY INVESTMENTS
EQUITY MARKETS
EQUITY PORTFOLIO
EXCESS RETURN
EXCESS RETURNS
EXTERNAL INVESTORS
FINANCES
FINANCIAL MARKETS
FINANCIAL SECURITIES
FINANCIAL SERVICES
FINANCIAL STUDIES
FOREIGN ASSET
FOREIGN MUTUAL FUNDS
FOREIGN STOCKS
GDP
GROUP OF INVESTORS
GROUPS OF INVESTORS
HOLDING
HOLDING PERIOD
HOLDING PERIODS
HOLDINGS
HOUSEHOLD INCOME
ILLIQUID ASSETS
ILLIQUID SECURITIES
ILLIQUID SECURITY
ILLIQUIDITY
INCOME SHOCKS
INCOMES
INDIVIDUAL INVESTOR
INDIVIDUAL INVESTORS
INDIVIDUAL SECURITIES
INSTITUTIONAL INVESTORS
INTEREST RATE
INTERNATIONAL BANK
INVENTORIES
INVENTORY
INVESTING
INVESTMENT ADVISORS
INVESTMENT DECISIONS
INVESTMENT HORIZONS
INVESTMENT OPPORTUNITIES
INVESTMENT PERFORMANCE
INVESTMENT POLICIES
INVESTOR BEHAVIOR
INVESTOR HOLDING
INVESTOR LOSSES
INVESTOR RATIONALITY
INVESTOR SENTIMENT
INVESTOR WELFARE
LARGE CAP
LARGE CAP STOCK
LIQUID ASSETS
LIQUID STOCKS
LIQUIDITY
LIQUIDITY PREMIUM
LIQUIDITY RISK
LONG-TERM INVESTORS
MARGINAL UTILITY
MARKET CAPITALIZATION
MARKET EQUILIBRIUM
MARKET LEVEL
MARKET LIQUIDITY
MARKET MAKER
MARKET MAKERS
MARKET MOVEMENTS
MARKET PARTICIPANTS
MARKET PORTFOLIO
MARKET RETURN
MARKET SUPPLY
MARKET VOLATILITY
MUTUAL FUND
MUTUAL FUND FLOWS
MUTUAL FUND PERFORMANCE
MUTUAL FUNDS
NET RETURN
NET RETURNS
NOISE TRADERS
NUMBER OF INVESTOR
NUMBER OF INVESTORS
NUMBER OF SHARES
ORDER FLOW
ORDER FLOWS
POLITICAL ECONOMY
PORTFOLIO
PORTFOLIO DIVERSIFICATION
PORTFOLIO PERFORMANCE
PORTFOLIO POSITIONS
PORTFOLIOS
POSITIVE ABNORMAL RETURNS
PREDICTABILITY
PREVIOUS STUDIES
PRICE FLUCTUATIONS
PRIVATE SECTOR DEVELOPMENT
PUBLIC POLICY
PURCHASE PRICE
PURCHASING
RATE OF RETURN
RAW RETURNS
RETAIL
RETAIL INVESTOR
RETAIL INVESTORS
RETURN
RETURNS
RISK EXPOSURE
RISK NEUTRAL
ROBUSTNESS CHECKS
SALE
SALES
SECURITIES TRANSACTION
SECURITIES TRANSACTIONS
SECURITY HOLDINGS
SECURITY PRICES
SHORT-TERM RETURNS
SHORT-TERM TRADING
SOPHISTICATED INVESTORS
SPREAD
STOCK CHARACTERISTICS
STOCK HOLDINGS
STOCK MARKET
STOCK PRICE
STOCK RETURNS
STOCKS
SUPPLIERS
TAX
TAX POLICY
TERM STRUCTURE OF INTEREST RATES
TIME HORIZON
TRADES
TRADING
TRADING ACTIVITY
TRADING COSTS
TRADING DAY
TRADING DAYS
TRADING VOLUME
TRANSACTION
TRANSACTION COST
TRANSACTION COSTS
TRANSACTION PRICE
TRANSACTIONS COSTS
TURNOVER
UNSOPHISTICATED INVESTOR
VOLATILITY
WEALTH
Anginer, Deniz
Liquidity Clienteles : Transaction Costs and Investment Decisions of Individual Investors
geographic_facet The World Region
The World Region
relation Policy Research working paper ; no. WPS 5318
description Theoretical papers link the liquidity premium to the optimal trading decisions of investors facing transaction costs. In particular, investors' holding periods determine how transaction costs are amortized and priced in asset returns. Using a unique data set containing two million trades, this paper investigates the relationship between holding periods and transaction costs for 66,000 households from a large discount brokerage. The author finds that transaction costs are an important determinant of investors' holding periods, after controlling for household and stock characteristics. The relationship between holding periods and transaction costs is stronger among more sophisticated investors. Households with longer holding periods earn significantly higher returns after amortized transaction costs, and households that have holding periods that are positively related to transaction costs earn both higher gross and net returns. The author shows that there is correlation in the demand for liquid assets across households and, consistent with the notion of flight to liquidity, this demand increases during times of low market liquidity. Households with higher incomes and with higher wealth invested in the stock market supply liquidity when market liquidity is low.
format Publications & Research :: Policy Research Working Paper
author Anginer, Deniz
author_facet Anginer, Deniz
author_sort Anginer, Deniz
title Liquidity Clienteles : Transaction Costs and Investment Decisions of Individual Investors
title_short Liquidity Clienteles : Transaction Costs and Investment Decisions of Individual Investors
title_full Liquidity Clienteles : Transaction Costs and Investment Decisions of Individual Investors
title_fullStr Liquidity Clienteles : Transaction Costs and Investment Decisions of Individual Investors
title_full_unstemmed Liquidity Clienteles : Transaction Costs and Investment Decisions of Individual Investors
title_sort liquidity clienteles : transaction costs and investment decisions of individual investors
publishDate 2012
url http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100526133302
http://hdl.handle.net/10986/3803
_version_ 1764388429622149120
spelling okr-10986-38032021-04-23T14:02:12Z Liquidity Clienteles : Transaction Costs and Investment Decisions of Individual Investors Anginer, Deniz ACCOUNTING ADVERSE EFFECTS ADVERSE SELECTION AGGREGATE MARKET AMOUNT OF CAPITAL ASSET PRICES ASSET PRICING ASSET RETURNS ASYMMETRIC INFORMATION BASIS POINTS BENCHMARKS BID BOOK VALUE BOOK-TO-MARKET BPS BROKERAGE BROKERAGE HOUSE CAPITAL MARKET CHECKS CLOSING PRICE CLOSING PRICES COMMON MARKET COMMON STOCK COMMON STOCKS CONSUMER FINANCES DECISION MAKING DEMOGRAPHIC DISCOUNT BROKERAGE DIVERSIFIED PORTFOLIOS DUMMY VARIABLE DUMMY VARIABLES ECONOMIC THEORY EFFICIENT MARKET EQUILIBRIUM EQUITIES EQUITY INVESTMENTS EQUITY MARKETS EQUITY PORTFOLIO EXCESS RETURN EXCESS RETURNS EXTERNAL INVESTORS FINANCES FINANCIAL MARKETS FINANCIAL SECURITIES FINANCIAL SERVICES FINANCIAL STUDIES FOREIGN ASSET FOREIGN MUTUAL FUNDS FOREIGN STOCKS GDP GROUP OF INVESTORS GROUPS OF INVESTORS HOLDING HOLDING PERIOD HOLDING PERIODS HOLDINGS HOUSEHOLD INCOME ILLIQUID ASSETS ILLIQUID SECURITIES ILLIQUID SECURITY ILLIQUIDITY INCOME SHOCKS INCOMES INDIVIDUAL INVESTOR INDIVIDUAL INVESTORS INDIVIDUAL SECURITIES INSTITUTIONAL INVESTORS INTEREST RATE INTERNATIONAL BANK INVENTORIES INVENTORY INVESTING INVESTMENT ADVISORS INVESTMENT DECISIONS INVESTMENT HORIZONS INVESTMENT OPPORTUNITIES INVESTMENT PERFORMANCE INVESTMENT POLICIES INVESTOR BEHAVIOR INVESTOR HOLDING INVESTOR LOSSES INVESTOR RATIONALITY INVESTOR SENTIMENT INVESTOR WELFARE LARGE CAP LARGE CAP STOCK LIQUID ASSETS LIQUID STOCKS LIQUIDITY LIQUIDITY PREMIUM LIQUIDITY RISK LONG-TERM INVESTORS MARGINAL UTILITY MARKET CAPITALIZATION MARKET EQUILIBRIUM MARKET LEVEL MARKET LIQUIDITY MARKET MAKER MARKET MAKERS MARKET MOVEMENTS MARKET PARTICIPANTS MARKET PORTFOLIO MARKET RETURN MARKET SUPPLY MARKET VOLATILITY MUTUAL FUND MUTUAL FUND FLOWS MUTUAL FUND PERFORMANCE MUTUAL FUNDS NET RETURN NET RETURNS NOISE TRADERS NUMBER OF INVESTOR NUMBER OF INVESTORS NUMBER OF SHARES ORDER FLOW ORDER FLOWS POLITICAL ECONOMY PORTFOLIO PORTFOLIO DIVERSIFICATION PORTFOLIO PERFORMANCE PORTFOLIO POSITIONS PORTFOLIOS POSITIVE ABNORMAL RETURNS PREDICTABILITY PREVIOUS STUDIES PRICE FLUCTUATIONS PRIVATE SECTOR DEVELOPMENT PUBLIC POLICY PURCHASE PRICE PURCHASING RATE OF RETURN RAW RETURNS RETAIL RETAIL INVESTOR RETAIL INVESTORS RETURN RETURNS RISK EXPOSURE RISK NEUTRAL ROBUSTNESS CHECKS SALE SALES SECURITIES TRANSACTION SECURITIES TRANSACTIONS SECURITY HOLDINGS SECURITY PRICES SHORT-TERM RETURNS SHORT-TERM TRADING SOPHISTICATED INVESTORS SPREAD STOCK CHARACTERISTICS STOCK HOLDINGS STOCK MARKET STOCK PRICE STOCK RETURNS STOCKS SUPPLIERS TAX TAX POLICY TERM STRUCTURE OF INTEREST RATES TIME HORIZON TRADES TRADING TRADING ACTIVITY TRADING COSTS TRADING DAY TRADING DAYS TRADING VOLUME TRANSACTION TRANSACTION COST TRANSACTION COSTS TRANSACTION PRICE TRANSACTIONS COSTS TURNOVER UNSOPHISTICATED INVESTOR VOLATILITY WEALTH Theoretical papers link the liquidity premium to the optimal trading decisions of investors facing transaction costs. In particular, investors' holding periods determine how transaction costs are amortized and priced in asset returns. Using a unique data set containing two million trades, this paper investigates the relationship between holding periods and transaction costs for 66,000 households from a large discount brokerage. The author finds that transaction costs are an important determinant of investors' holding periods, after controlling for household and stock characteristics. The relationship between holding periods and transaction costs is stronger among more sophisticated investors. Households with longer holding periods earn significantly higher returns after amortized transaction costs, and households that have holding periods that are positively related to transaction costs earn both higher gross and net returns. The author shows that there is correlation in the demand for liquid assets across households and, consistent with the notion of flight to liquidity, this demand increases during times of low market liquidity. Households with higher incomes and with higher wealth invested in the stock market supply liquidity when market liquidity is low. 2012-03-19T18:40:06Z 2012-03-19T18:40:06Z 2010-05-01 http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100526133302 http://hdl.handle.net/10986/3803 English Policy Research working paper ; no. WPS 5318 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Publications & Research :: Policy Research Working Paper The World Region The World Region