@article {Borkovecjoi.2020.1.136, author = {Milan Borkovec and Konstantin Tyurin}, title = {Are Expected Costs and Returns Identical Twins? Decoupling Slippage from Momentum over Shorter Horizons}, elocation-id = {joi.2020.1.136}, year = {2020}, doi = {10.3905/joi.2020.1.136}, publisher = {Institutional Investor Journals Umbrella}, abstract = {Does the quest for best execution on behalf of large institutional orders boil down to optimizing the short-term momentum during their trading? We clip the trades originating from buy-side clients{\textquoteright} orders into five- and thirty-minute clusters and find that (1) mostly favorable short-term returns experienced by clients{\textquoteright} fills are counter-balanced by adverse returns when executions of parent orders in progress are postponed; (2) although cost curve heuristics for short and longer horizon clusters are mostly alive and well, the {\textquotedblleft}identical twins{\textquotedblright} positive cost-return relation over longer horizons tends to break down because of adverse selection dominating executions in shorter intervals; and (3) the nature and strength of the cost-return link varies with liquidity, duration, and type of trading intervals. The distinct {\textquotedblleft}signature{\textquotedblright} patterns behind price trajectories around child order executions vary systematically by spread capture and the algorithmic strategy in place. Multiresolution time frames, trading/nontrading interval taxonomy, and other methodological tools have practical implications for post-trade modeling and TCA.TOPICS: Performance measurement, quantitative methodsKey Findings{\textbullet} Significant price impact occurs in intervals without own trading.{\textbullet} In contrast to traditional TCA at parent order level, no {\textquotedblleft}identical twins{\textquotedblright} relation between slippage cost and signed returns is found in granular fixed duration (5 min) intervals.{\textbullet} Although traditional {\textquotedblleft}cost curve{\textquotedblright} heuristics are (mostly) alive and well, multiple timeframe analytics (full day, 30-min, 5-min, tick-level) and signature price profiles bring new insights into algorithmic trading behavior.}, issn = {1068-0896}, URL = {https://joi.pm-research.com/content/early/2020/05/30/joi.2020.1.136}, eprint = {https://joi.pm-research.com/content/early/2020/05/30/joi.2020.1.136.full.pdf}, journal = {The Journal of Investing} }