PT - JOURNAL ARTICLE AU - Tianwu (Michael) Cai AU - George Sofianos TI - Multi-day Executions AID - 10.3905/jot.2006.644086 DP - 2006 Jun 30 TA - The Journal of Trading PG - 25--33 VI - 1 IP - 3 4099 - https://pm-research.com/content/1/3/25.short 4100 - https://pm-research.com/content/1/3/25.full AB - Asset managers often have to spread their order executions over several days to minimize liquidity impact. In this paper, we present a framework for evaluating multi-day execution strategies and use a sample of multi-day agency executions to quantify the trade-offs. Our analysis shows that for volatile stocks and/or long execution horizons, execution risk can easily overwhelm all other considerations. For stocks with daily close-to-close volatility of 3%, for example, the five-day execution risk is 400 basis points. The evidence from our sample of multi-day executions suggests that for daily executions up to 15% average daily volume and up to five-day execution horizons, cross-day impact persistence and information leakage are relatively small: the impact cost of selling 15 million shares over five days, for example, is only slightly higher than the impact cost of selling 3 million shares over one day. Our multi-day executions, however, have high 50 basis points short-term alpha. This high alpha raises the cost of spreading execution across days.TOPICS: Equity portfolio management, risk management