Estimating Historical Trading Costs with Market Impact Models

Summary

The document addresses how to estimate realistic transaction costs for simulations across trading frequencies. It recommends studying market impact research and choosing a market impact model, then combining that model with a planned trading profile to estimate expected costs. It points to two papers as examples: one uses data from a broker, while the other draws on the Abel Noser database.

The response offers a research approach rather than a historical cost database covering the requested period. It gives no details about data access, model calibration, market coverage, or how costs vary across regimes and execution styles. Estimates depend on the selected impact model and how well the trading profile reflects actual execution, so the cited studies are starting points rather than a complete answer to the data request.

Key ideas

• Market impact research can inform estimates of historical transaction costs.
• Choose a market impact model that fits the market and execution question.
• Combine the selected model with a trading profile to estimate expected costs.
• The cited studies use broker and Abel Noser data, but the response does not provide a cost database.

Tags

# Where can one find realistic historical transaction costs?


# Where can one find realistic historical transaction costs?












I am interested in strategy simulation at different frequencies (high frequency and daily frequency) and I want to compute the optimal frequency of execution.

To do this, I need to obtain realistic historical transaction costs from 1987 onward.

Does anyone know where one might obtain such a database?

## Answer by lehalle (score 5, accepted)

https://quant.stackexchange.com/a/16902

You need to read papers about market impact. You will find a lot of information about transaction costs. Two recent ones:

- Market impacts and the life cycle of investors orders, by Emmanuel Bacry, Adrian Iuga, Matthieu Lasnier, CAL

- Beyond the square root: Evidence for logarithmic dependence of market impact on size and participation rate, by Elia Zarinelli, Michele Treccani, J. Doyne Farmer, Fabrizio Lillo

The first one use the database of a broker, and the second one the Abel Noser database.

Once you selected the market impact model you want, you can convoluate it with your trading profile to obtain your expected trading costs.

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