Determinants of the execution costs of common stock trades by individual investors

Data on a large sample of transactions in common stocks by individual investors over a nine‐year period are examined to identify factors that influence the magnitude of the price concessions those investors experienced in trades executed on the New York and American Stock Exchanges. Among the factors that appear to have an influence on such ‘execution costs’ are the exchange where the security involved is traded and the direction of the price movement in the security on the day of the trade. The size of the trade, the price of the stock, and the volatility of price, however, do not seem to have an effect. There is also little indication that execution costs have declined over time as the securities markets have become less subject to regulation.