TY - JOUR T1 - How Does a Stock Trade? <em>Stock-Specific Peer Group Analysis and Its Application to Portfolio Liquidity</em> JF - The Journal of Trading SP - 5 LP - 16 DO - 10.3905/jot.2017.12.4.005 VL - 12 IS - 4 AU - Ian Domowitz AU - Kumar Giritharan Y1 - 2017/09/30 UR - https://pm-research.com/content/12/4/5.abstract N2 - The authors introduce an activity-based approach to trading performance comparisons, in which the common denominator is an individual security. The framework facilitates answers to three questions. 1) Is there valuable information in peer trading comparisons if one analyzes performance on a stock-by-stock basis? Aggregated comparisons across institutions and brokers disguise important differences in the effectiveness of the trading process. 2) How does a stock trade? An answer lies in the characterization of single-stock profiles. The approach exploits institutional trading activity, combining such information with market data and repurposing old tools with the goal of reducing institutional trading costs. 3) How does one characterize the liquidity profile of a portfolio? The answer relies on observed liquidity, as evidenced by institutional trading activity. The solution depends on building the portfolio profile up from individual securities and yields not only the implementation costs of liquidation, for example, but also the horizon over which this may be accomplished.TOPICS: Performance measurement, portfolio construction ER -