Extremely, the transaction price matches quotes at the time the trade was reported. The correct comparison, however, would be to align the price with quotes that were in effect at an earlier time--that is, at the time the trade was actually done or when the order hit the market.
Researchers in finance use this information to assess the quality of the market, assess execution costs and do extensive studies on the stock trading process.
Importance to Investors
Private investors, portfolio managers and financial analysts, who assess the performance of the financial markets and brokerages, seek precise measures of trade execution costs. They also need To measure reasons for variation in these costs. Control of transaction costs can be as important to portfolio performance as the discernment of wrongly valued stocks in competitive markets.
Imperfect Data
TAQ data fails to record whether a buyer or seller initiated the trade.Thanks to 1993, break on intraday transactions, which consists of trades and quotes, for securities listed on the American Inventory Transform, Distinct York Inventory Replace, and Nasdaq Federal Mart Process is stored in the Commerce and Excerpt database.
