The nature and methods of the evaluation of the transaction costs on the stock market

Abstract

Purpose. The scientific hypotheses about the necessity of allocating and measuring of transaction costs as an important institutional factor of efficiency of the stock market is grounded. The main types of transactions and the factors that influence on the amount of transaction costs are identified.  The methods for their measuring are clarified.

Methodology. The methodology of the institutional analysis is used for consideration of essence, types and functions of transactions on the stock market.  The ordinal method, which involves ranking of transaction costs according to their relevance, and the cardinal method, which involves the valuation of the costs in different levels of economics: micro, mezzo, macro levels, are used for the estimation of level of transaction costs on the Ukrainian stock market. The method of comparative analysis is used for the analysis of the information transparency of  the market.

Results. The essence of transaction costs on the stock market and their quantitative estimation methods are considered in the article. The content and functions of the major types of transactions and the main factors affecting the level of transaction costs are revealed. It is determined that in order to select sources of raising of capital it will be appropriate to use the ordinal method of the analysis of transaction costs. For the evaluation of the level of costs it will be more appropriate to use the cardinal method. In order to reduce transaction costs it is offered to change the model of information disclosure of securities issuers.

Scientific originality. Based on the methodology of institutional analysis it is proved that institutional costs are an important factor in the effectiveness of the stock market. The interpretation of the essence of transactions on the stock market It is clarified. It is considered as a set of actions (interaction) of economic subjects in the process of alienation and the attribution of rights to securities.  Their functions are revealed. It is proposed to define transaction costs of the stock market as costs of market participants to conduct transactions with securities that occur in conditions of uncertainty and information asymmetry.

Practical value. Proposals as for the change of the model of the information transparency of the stock market can reduce the costs of market participants for the search of reliable information and the transaction costs.