How broker ability affects institutional trading costs

Carole Comerton-Forde*, Christian Fernandez, Alex Frino, Teddy Oetomo

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

10 Citations (Scopus)

Abstract

The present paper shows that broker research and trade execution ability has a significant impact on the cost of institutional trading. The results reveal that there is significant variation in the ability of brokers to control execution costs. Trades executed by brokers with stronger research ability exhibit a higher permanent price impact, whereas those executed by brokers with better execution ability exhibit a lower temporary price impact. Brokers are also found to specialize on an industry level that gives rise to variation in ability within a brokerage house.

Original languageEnglish
Pages (from-to)351-374
Number of pages24
JournalAccounting and Finance
Volume45
Issue number3
DOIs
Publication statusPublished - Nov 2005

Keywords

  • Broker ability
  • Institutional trades
  • Transaction costs

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