Evaluating the Process
Traders Magazine, March 2001
It is taken for granted that the quality of trading can influence investment returns. So where does the trader fit in and ensure he adds value? To answer this question, traders are using tools that can provide them timely feedback. These tools compare their trades to an accepted benchmark.
For example, decision price, the price that prevailed during the portfolio manager's stock selection, or when the order reached the trader's desk, is a good proxy for the price the portfolio manager is trying to achieve. It can be adjusted by an expectational cost, so the trader can compare trades with varying liquidity characteristics.
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