Understanding Transaction Costs in Trading

Imagine you are managing a client’s investment portfolio that has achieved substantial growth over the past year. As market conditions change, you assess the need to rebalance the portfolio to maintain the desired asset allocation. However, you are concerned about the transaction costs associated with making these changes.

Transaction costs can significantly impact the overall returns on the portfolio. It is important to evaluate which components of transaction costs are most relevant when deciding whether to execute a trade or wait for more favorable conditions.

Which of the following factors most directly affects the transaction cost of executing a large trade in the equity market?