A simple behavioural model of investor holding periods under the presence of trading costs

We develop a simple behavioural model where changes in investor holding periods of stocks are a function of variations in levels and shocks of trading costs. We construct a value weighted portfolio of all stocks listed on the London Stock Exchange, over the time period of 1990–2014 in order to empirical examine the model. We establish that levels have a greater impact then unanticipated trading costs on investor holding periods. Our article outlines the importance of trading costs in determining investor portfolio construction.