Research
Execution Cost Research
Slippage is one of the most studied problems in market microstructure. It is also one of the most ignored by retail traders. This page covers what the research says about execution costs and why we think it matters.
01
What Research Shows About Slippage
- Academic work consistently finds bid-ask spread is the dominant component of execution cost for retail order flow.
- Time of day has a predictable effect on spread width — intraday spread curves are well documented in market microstructure literature.
- Kyle (1985) introduced the price impact coefficient that bears his name — it measures how much prices move per unit of signed order flow.
- Amihud (2002) proposed an illiquidity ratio based on price movement per dollar of volume — widely used as a liquidity proxy.
- VPIN (Easley et al 2012) introduced a toxicity measure based on volume imbalance between buyer and seller initiated flow.
02
What Practitioners Find
- Systematic traders consistently find realized returns below backtest projections — execution friction is a primary cause.
- Slippage compounds across executions — a small per-trade cost becomes significant at scale.
- Fill quality varies predictably by time of day, volatility regime, and liquidity conditions.
- Most backtesting platforms assume mid-fill — this systematically overstates edge.
03
What We Are Working On
- We are building tools to make pre-trade execution condition data accessible via API.
- We are in early beta — three trading days of live data so far.
- We are not publishing our methodology at this time.
- We are interested in talking to systematic traders who want to compare our signals against their actual fill data.
04
Contact
Questions about execution cost research or interest in comparing signals against your fill data are welcome.