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Determinants of the Impact Cost of Nifty Shares: An Empirical Study

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  • Srinivas Shirur

Abstract

Impact cost is an indicator to judge the liquidity in the stock market. The lower the cost, the higher is the liquidity and vice versa. It shows the rise/fall in the stock price (in percentage) while buying/selling the desired quantity of security compared to its ideal price. The degree of market efficiency in a market is closely related to the impact costs faced in trading in the market: lower impact costs are associated with enhanced levels of market efficiency. Theoretically, there are many variables which affect the levels of the impact cost over a period of time (time series analysis) as well as across the companies, sectors, and economy at any given point of time( cross-section analysis). Some of the key variables are : level of the index, percentage of free float of the company, price of the share, beta, volatility, percentage increase in the price of shares, corporate governance, size of the company, volume of trade in any given day, etc. The present study has tried to analyse the variables which significantly affect the level of the impact cost and the extent to which they are significant.

Suggested Citation

  • Srinivas Shirur, 2007. "Determinants of the Impact Cost of Nifty Shares: An Empirical Study," Paradigm, , vol. 11(2), pages 52-56, July.
    • Handle: RePEc:sae:padigm:v:11:y:2007:i:2:p:52-56
    DOI: 10.1177/0971890720070209
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