The Role of Trading Frequency and Transaction Cost on Asset Pricing: Evidence from Pakistan Stock Exchange
Abstract
This paper compares price impact ratio (Amihud, 2002) and new price
impact ratio (Florackis, Gregoriou, & Kostakis, 2011) by taking daily
data from Pakistani market for a period of 14 years ranging from
January 2000 to December 2013. The first part of the paper covers the
comparison of deciles portfolios and the second part covers risk
adjusted deciles portfolios. Results suggest that new price impact model
gives better results as compared to extensively applied price impact
model and confirms that costs of transaction and trading frequency
jointly effect asset pricing. Therefore, both the aspects should be studied
mutually rather than in isolation.
JEL Classification Codes: G10; G12; G14
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References
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