Transaction cost analysis

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The transaction cost analysis evaluates (both before rare: transaction costs forecast ) and after completion of a transaction, the transaction costs with the goal to minimize these. According to the transaction cost theory , every economic transaction also incurs transaction costs that are not all independent of one another. For example, a higher research effort (higher information acquisition costs) can lead to more favorable conditions (lower processing costs or transport costs) or better prices. The transaction cost analysis tries to weigh the various costs against each other and to find an optimum. An analysis after the conclusion of a transaction can show to what extent the actual transaction costs deviate from the optimum or from the benchmark set in advance, and serves as a basis for future improvements.

Transaction cost analysis in securities trading

In addition to trading and processing fees (explicit costs), large orders in securities trading can, depending on the market model, cause market impact , which is made up of the liquidity premium and adverse price movements (implicit costs). Over time, the transaction costs reduce the performance of a portfolio. By dividing the individual order into several orders spread over time, the implicit costs can be reduced, whereby the explicit costs can increase due to fees per order. It is also possible to use alternative trading systems, e.g. B. to use crossing networks or dark pools , which incur opportunity costs (costs due to non-execution). Here, the transaction cost analysis, supported by software, tries to find an optimum, e.g. B. specify the number, size and delivery times of the orders. After a securities transaction, the analysis shows the deviation from the selected benchmark and allows the trading strategy to be re-optimized.

Transaction cost analysis for e-services

By e-services generally better transaction cost efficiencies generated and reduces information asymmetries. This offers the customer specific advantages when using electronic markets: there are basically low transaction costs, since, in addition to time savings in obtaining information, there is also a higher quality in the selection of search results through filters and a higher quantity of the alternatives offered in the selection process . These characteristics apply, for example, to the electronic services of the Internet auction house eBay . In the case of online services , there is also transparency in terms of costs. For the transaction cost analysis, this means that the opportunity on the contractual partner side is reduced, which reduces the customer's uncertainty. A long-term information symmetry is sought, which is reflected in the consumption-oriented pricing. The automatic scalability of cloud computing services, which only satisfy the actual resource requirements of applications, reduces specificity, since only the capacities used have to be paid for. The problem in this context, however, is data security, which involves the outsourcing of business data to an external infrastructure. As a result, the parametric uncertainty within the transaction cost analysis increases. However, the uncertainty can be reduced again with the help of contract adjustments.

literature

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  1. ↑ Kirchner, C. and Picot, A. (1987): Transaction Cost Analysis of Structural Changes in the Distribution System: Reflections on Institutional Developments in the Federal Republic of Germany (PDF; 2.3 MB)
  2. ↑ Market impact costs of institutional equity trades, doi : 10.1016 / j.jimonfin.2007.01.007
  3. ↑ Perold, André F. "The Implementation Shortfall: Paper vs. Reality." Journal of Portfolio Management 14, no.3 (spring 1988): 4-9.
  4. ^ EDHEC: Cash Equity Transaction Cost Analysis
  5. ↑ Dealing with fragmentation (PDF; 318 kB)