But it's a difficult phenomenon to measure, and most methods being used today are significantly biased.
Adverse selection is the flip side of opportunity costs.
There is a built-in tension between the fear of trading too early, only to see prices later move against you, and the fear of waiting so long you miss the opportunity altogether. With the availability of increasingly sophisticated tools for transaction analysis, the investment community has begun paying closer attention to adverse selection. It's a natural part of the larger effort to understand and control trading costs. But as is so often the case, the measurement of adverse selection is much simpler in theory than in practice. This difference is the estimated adverse selection cost.