Frictional cost

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Frictional cost

The difference between an index fund return and the index it represents. The typically lower rate of return from the fund results from transactions costs.

Frictional Cost

The difference between the return on an index fund and the index it tracks. For example, if the return on the S&P 500 for a period of time is 5% and the return on an index fund tracking the S&P 500 is 3%, the frictional cost is 2%. The return on the index fund is nearly always lower than the return on the index itself because of fees, expenses, and other costs associated with managing the fund. A high frictional cost, however, may indicate that the investment company is either charging excessive fees or the fund does not track the index as closely as is claimed.
References in periodicals archive ?
This new portal will not only help reduce the unnecessary frictional costs between insurers, but also reduces time to settle claims.
The targeted reduction in frictional costs will further improve the competitive landscape and encourage increased trading volumes, the company added.
This could unnecessarily disrupt the marketplace, producing frictional costs that are not offset by commensurate benefits.
The contract continues indefinitely, reducing frictional costs and eliminating time consuming administration at renewal.
A successful agreement on trade facilitation at the WTO Ministerial Conference in Bali will particularly benefit SMEs in developing countries, as their competitiveness currently suffers over-proportionally from the frictional costs of trade.
Despite the many good reasons to include user communities in their innovation processes, many companies fail to do so, suspecting that the frictional costs presented by these challenges will outweigh the potential benefits.
Lowering frictional costs further, particularly in proportion with deal size, would help change this.
Our environment features two key imperfections: (1) contracting constraints that place limits on the complexity of state-contingent payments in risk-transfer contracts and (2) frictional costs associated with holding risk-bearing assets.
Cooksona[euro](tm)s board has already carried out an initial assessment of frictional costs related to a separation and concluded that the one-off, upfront cash costs would fall in the range of GBP50m (USD79.
The importance and magnitude of frictional costs varies from fund to fund, depending on turnover.
Frictional costs occur when insurers have to operate under higher financial costs and capital requirements.
Frictional costs of moving money to and from the subsidiary.