Why does shortfall strategy trade heavier early in the day?
Should be to minimize realized loss from the decision price. I could have decision price 40 and fill my entire order at 45 two hours after open with huge implementation shortfall realized loss and 0 mtoc. If using limit orders i may cancel trade increasing mtoc…or I could raise my order price against my benchmark and increase delay costs. Hrm I think you can really make a case for everyone. How about “to minimize implementation shortfall to the decision price.”
As I remember to minimize opportunity cost. VWAP tries to minimize market impact. But implementation shorfall strategy tries to reduce opportunity cost. relative to paper portfolio.