标题: Disadvantage of VWAP [打印本页] 作者: RoastBeef 时间: 2011-7-11 18:57 标题: Disadvantage of VWAP
Volume 6, page 29.
One disadvantage of VWAP is "not senstive to trade size or market conditions".
What does it mean by that?作者: wake2000 时间: 2011-7-11 18:57
lol
Re: Execution of Portfolio Decisions
Posted by: deriv108 (IP Logged)
Date: April 10, 2011 02:40PM
IS(implementation shortfall) =
(gain on paper portfolio - gain on real portfolio)/(initial investment in paper portfolio)
VWAP is a price, IS is a percentage.
Both are a measure of transaction cost.
"Surprisingly", both become algorithmic trading strategies.
One is simple logical participation strategy, the other is IS strategy.
VWAP can be gamed, so it's not informative for traders who dominates. It does not account for delayed cost and missed trade opportunity.
So we have IS, which solves the problem of VWAP. But it's unfamiliar to traders(doubt it), and requires considerable data and analysis.
Overall, Is for small, urgent trade, which is usually traded early in the day to minimize opportunity cost. For illiquid stock and large trade, use broker.
What's the best execution? It depends on the investment decision, circumstance and etc.
Regarding to ethics in trading. 1) fallen commission: traders shift cost to implicit cost. 2) electronic trading provide more anonymity: buy-side and sell-side traders become more adversarial.作者: infinitybenzo 时间: 2011-7-11 18:57
What do they mean by VWAP can be gamed?作者: Unforseen 时间: 2011-7-11 18:57
An example of VWAP gaming: the trader can delay the trade if he thinks the ask price is above the estimated VWAP.
