How Broker Ability Affects Institutional Trading Costs

27 Pages Posted: 13 Aug 2003

See all articles by Alex Frino

Alex Frino

The University of Sydney - Discipline of Finance; Financial Research Network (FIRN)

Carole Comerton-Forde

University of Melbourne - Department of Finance; Centre for Economic Policy Research (CEPR)

Christian Fernandez

The University of Sydney - Discipline of Finance

Teddy Oetomo

Schroder Investment Management Indonesia

Date Written: July 2004

Abstract

This paper demonstrates 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 while those executed by brokers with better execution ability exhibit a lower temporary price impact. Brokers are also found to specialise on an industry level which gives rise to variation in ability within a brokerage house.

Keywords: transaction costs, institutional trading

JEL Classification: G10, G20

Suggested Citation

Frino, Alex and Comerton-Forde, Carole and Fernandez, Christian and Oetomo, Teddy, How Broker Ability Affects Institutional Trading Costs (July 2004). Available at SSRN: https://ssrn.com/abstract=421080 or http://dx.doi.org/10.2139/ssrn.421080

Alex Frino

The University of Sydney - Discipline of Finance ( email )

Futures Research Centre
P.O. Box H58
Sydney NSW
Australia
+61 2 9299 1809 (Phone)
+61 2 9299 1830 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Carole Comerton-Forde (Contact Author)

University of Melbourne - Department of Finance ( email )

198 Berkeley Street
Carlton VIC 3010
Australia

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Christian Fernandez

The University of Sydney - Discipline of Finance ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

Teddy Oetomo

Schroder Investment Management Indonesia ( email )

31 Gresham Street
London, EC2V 7QA
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
259
Abstract Views
3,032
rank
168,299
PlumX Metrics