Importance of transaction costs for asset allocation in foreign exchange markets

IF 10.4 1区 经济学 Q1 BUSINESS, FINANCE Journal of Financial Economics Pub Date : 2024-06-19 DOI:10.1016/j.jfineco.2024.103886
Ilias Filippou , Thomas A. Maurer , Luca Pezzo , Mark P. Taylor
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Abstract

Transaction costs have a first-order effect on the performance of currency portfolios. Proportional costs based on quoted bid–ask spread are relatively small, but when a fund is large, costs due to the trading volume price impact are sizable and quickly erode returns, leaving many popular strategies unprofitable. A mean–variance-transaction-cost optimized approach (MVTC) that accounts for costs in the optimization efficiently tackles the problem with only relatively minor negative implications on before-cost profitability. MVTC is robust even when the price impact of trading is severe. Finally, we introduce an accurate extrapolation approach to expand the sample of the realized Amihud measure of Ranaldo and Santucci de Magistris (2022) from 12 to 26 currencies and from 2012 back in time to 1986.

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交易成本对外汇市场资产配置的重要性
交易成本对货币投资组合的表现有一阶影响。基于报价买卖价差的比例成本相对较小,但当基金规模较大时,交易量价格影响所导致的成本则相当可观,并迅速侵蚀收益,使许多流行策略无利可图。在优化过程中考虑成本的均值方差-交易成本优化方法(MVTC)能有效解决这一问题,对成本前盈利能力的负面影响相对较小。即使交易对价格的影响非常严重,MVTC 也是稳健的。最后,我们引入了一种精确的外推法,将 Ranaldo 和 Santucci de Magistris(2022 年)的已实现 Amihud 度量的样本从 12 种货币扩展到 26 种货币,并从 2012 年追溯到 1986 年。
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来源期刊
CiteScore
15.80
自引率
4.50%
发文量
192
审稿时长
37 days
期刊介绍: The Journal of Financial Economics provides a specialized forum for the publication of research in the area of financial economics and the theory of the firm, placing primary emphasis on the highest quality analytical, empirical, and clinical contributions in the following major areas: capital markets, financial institutions, corporate finance, corporate governance, and the economics of organizations.
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