infonet-economy

I analyze the transaction costs on the Swiss Stock Exchange (SWX). Trading costs on the SWX are in line with the NYSE. The bid-ask spread components are examined in relation with market liquidity, trade size and the time of the day. The order processing costs are the largest cost component but the adverse selec-tion and order persistence components are also significant. Adverse selection and proc-essing costs affect to a wider extent less liquid stocks and characterize the afternoon trading. Also, the adverse selection (order processing) component increases (decreases) with trade size.