The following statements are taken from Greta (mathrm{E}). Marshall's article Execution Costs: The Plan Sponsor's View, which

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The following statements are taken from Greta \(\mathrm{E}\). Marshall's article "Execution Costs: The Plan Sponsor's View," which appears in Trading Strategies and Execution Costs, published by The Institute of Chartered Financial Analysts in 1988. (The publication is the product of a conference held in New York City on December 3, 1987):

a. "There are three components of trading costs. First there are direct costs which may be measured-commissions. Second, there are indirect-or market impact-costs. Finally, there are the undefined costs of not trading." What are market impact costs, and what do you think the "undefined costs of not trading" represent?

b. "Market impact, unlike broker commissions, is difficult to identify and measure." Why is market impact cost difficult to measure?

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