Preventing Information Leakage

61 Pages Posted: 10 Apr 2019 Last revised: 29 Oct 2022

See all articles by Jonathan Brogaard

Jonathan Brogaard

University of Utah - David Eccles School of Business

Dan Li

Chinese University of Hong Kong, Shenzhen

Matthew Ma

Rutgers, The State University of New Jersey - Accounting

Ryan Riordan

Queen's University - Smith School of Business; Ludwig-Maximilians-University Munich, Faculty of Business Administration (Munich School of Management)

Bart Zhou Yueshen

Singapore Management University - Lee Kong Chian School of Business

Date Written: October 15, 2022

Abstract

Traders devote significant resources to producing private information. The value of such informational is eroded when it is leaked. We study the use of multiple brokers by institutions to help mitigate information leakage. We document that trades using multiple brokers better predict future returns, consistent with information possessed by investors driving the decision to use multiple brokers. We find that trades using multiple brokers have lower price impacts and implementation shortfalls, higher long-term profitability, and fewer follower trades than similar single broker trades. The results suggest that traders use multiple brokers to successfully reduce information leakage.

Keywords: brokers, informed trades, trading profits, information leakage

JEL Classification: G14, G18

Suggested Citation

Brogaard, Jonathan and Li, Dan and Ma, Matthew and Riordan, Ryan and Yueshen, Bart Zhou, Preventing Information Leakage (October 15, 2022). Available at SSRN: https://ssrn.com/abstract=3353501 or http://dx.doi.org/10.2139/ssrn.3353501

Jonathan Brogaard (Contact Author)

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

HOME PAGE: http://www.jonathanbrogaard.com

Dan Li

Chinese University of Hong Kong, Shenzhen ( email )

Matthew Ma

Rutgers, The State University of New Jersey - Accounting ( email )

United States

Ryan Riordan

Queen's University - Smith School of Business ( email )

Smith School of Business, Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Ludwig-Maximilians-University Munich, Faculty of Business Administration (Munich School of Management) ( email )

Schackstr. 4
Munich, 80539
Germany

Bart Zhou Yueshen

Singapore Management University - Lee Kong Chian School of Business

50 Stamford Rd
Singapore, 178899
Singapore

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