How Broker Ability Affects Institutional Trading Costs

24 Pages Posted: 26 Nov 2005

See all articles by Carole Comerton-Forde

Carole Comerton-Forde

UNSW Business School; Financial Research Network (FIRN)

Alex Frino

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

Christian Fernandez

The University of Sydney - Discipline of Finance

Teddy Oetomo

Schroder Investment Management Indonesia

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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.

Suggested Citation

Comerton-Forde, Carole and Frino, Alex and Fernandez, Christian and Oetomo, Teddy, How Broker Ability Affects Institutional Trading Costs. Accounting and Finance, Vol. 45, No. 3, pp. 351-374, November 2005, Available at SSRN: https://ssrn.com/abstract=856448 or http://dx.doi.org/10.1111/j.1467-629X.2005.00139.x

Carole Comerton-Forde (Contact Author)

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

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

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

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

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

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