Implementation shortfall has become the industry standard for evaluation of portfolio transitions. Perold [1988] introduced the notion, which he defines as the difference between the calculated performance of a paper portfolio and the actual performance of an identical real portfolio based on actual market transactions. Perold’s key innovation was to extend the traditional perception of transaction costs to incorporate the opportunity cost of delaying the sale of a security intended for disposition or the purchase of a security targeted for acquisition. We present a comprehensive empirical analysis of implementation shortfall using a unique sample of individual security transactions. The sample includes detailed information for more than 800,000 transactions, including information about how the trades were implemented. Beyond the empirical analysis, we introduce an adjustment to implementation shortfall to account for liquidity and risk, based on a smaller sample of transition-level data. We argue that without adjustment it is impossible to compare the quality of portfolio transitions.