Mamduh M. Hanafi


We studied transaction costs in Indonesia market extended closely by Bonser-Neal et al. (1999). They investigated
transaction costs in Jakarta Stock Exchange (JSX) using period before automation (May 1995). To match
closely with Bonser-Neal et al. (1999), we used period right after JSX introduced trading automation (JATS or
Jakarta Automated Trading System). We used period from May 1995 to March 2003. We found that transaction
costs in the automation period were larger than those reported by Bonser-Neal et al. (1999). Automation
did not seem to automatically reduce transaction costs as expected. We found that domestic investors had larger
price impact than foreign investors. Similar to previous finding, we found that trade difficulty had a positive
effect on price impacts. We also found transaction costs in crisis period were larger than those in normal period.
We also found that size had a negative relationship with price impacts. Our paper provided evidence of the
transaction costs in Indonesia market after the automated trading was introduced in Indonesia market.


automated trading, crisis period, domestic investors, foreign investors, transaction cost

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