Preventing Information Leakage

62 Pages Posted: 10 Apr 2019 Last revised: 2 Nov 2020

See all articles by Jonathan Brogaard

Jonathan Brogaard

University of Utah - David Eccles School of Business

Dan Li

The University of Hong Kong - School of Economics and Finance

Matthew Ma

Southern Illinois University at Carbondale

Ryan Riordan

Queen's University - Smith School of Business

Date Written: November 15, 2018

Abstract

Investors 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, larger long-term trade profitability, and fewer follower trades than similar single broker trades. The results suggest that traders use multiple brokers to successfully avoid 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, Preventing Information Leakage (November 15, 2018). 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

The University of Hong Kong - School of Economics and Finance ( email )

Shenzhen
China

Matthew Ma

Southern Illinois University at Carbondale ( email )

Rehn Hall - Mail Code 4626
Carbondale, IL Illinois 62901-4515
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

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