Overview
Trade execution analysis is used to determine how effective a firms traders are in executing the trades given them by the portfolio managers.
When a portfolio manager determines that an asset represents a good buy (or sell), she instructs the traders to purchase the asset. However, it may take time for the trader to work the order.
Price Drift
The difference between the price at the time that the portfolio manager issues the trade order, and the price received by the trader can be measured. This difference is referred to as drift. The drift comes about as a combination of factors.
Volume Weighted Moving Average
In addition to measuring the price drift, many investment firms calculate the Volume Weighted Moving Average and compare it to the average price recieved by the trader. The calculation is given as
{% VWAP = \frac{\sum_i Price_i \times Volume_i}{\sum_i Volume_i} %}
When