When analyzing implementation shortfall, what is important for comparing performance?

In analyzing implementation shortfall, the key component for comparing performance is the decision price set before order execution.

The implementation shortfall measures the difference between the expected performance of a trading strategy and the realized performance after execution. The decision price reflects the theoretical optimal price at which a trader intends to execute the trade, based on market conditions and anticipated price movements before the actual transaction takes place. By comparing the execution price to the decision price, analysts can effectively assess the impact of market movements, timing, and the execution strategy on trading performance. This helps identify inefficiencies and potential areas for improvement in future trading activities.

While the execution price and other elements like trading volume may provide context, they do not serve as the benchmark for assessing the performance impact of implementation shortfall as directly as the decision price does.