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Trade size and transaction costs in over-the-counter markets
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Orientador(es)
Resumo(s)
I investigate the relationship between trade size and transaction costs in OTC markets. This
involves simulating the search-theoretic model developed by Lagos and Rocheteau (2009),
which implies that trade size and transaction costs increase together. For empirical analysis, I
utilize the TRACE enhanced dataset on corporate bond trades from 2006 to 2022 and compute
the bid-ask spread as a measure of transaction costs. My empirical analysis finds a negative
influence of trade size on transaction costs. I discuss the mismatch between the theoretical
model and empirical evidence considering the results of other empirical studies.
Descrição
Palavras-chave
Transaction cost Bid-ask spread Over-the-counter market Trading friction Trade size