Individual investors and broker types

Kingsley Y.L. Fong; David R. Gallagher; Adrian D. Lee

doi:10.1017/S0022109014000349

Individual investors and broker types

Kingsley Y.L. Fong, David R. Gallagher, Adrian D. Lee

Research output: Contribution to journal › Article › Research › peer-review

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Abstract

We study the informativeness of trades via discount and full-service retail brokers. We find that trades via full-service retail brokers are statistically and economically more informative than are trades via discount retail brokers. This finding holds in every year over the 12-year sample period and in various subsamples. We also find that past returns, volatility, and news announcements positively relate to the net volume of discount retail brokers, but these variables are unrelated to the net volume of full-service retail brokers. Our results suggest that broker type selection bias is an important consideration in studying individual investors' trades.

Original language	English
Pages (from-to)	431-451
Number of pages	21
Journal	Journal of Financial and Quantitative Analysis
Volume	49
Issue number	2
DOIs	https://doi.org/10.1017/S0022109014000349
Publication status	Published - 10 Mar 2014
Externally published	Yes

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Individual investors and broker typesFinal published version, 109 KBLicence: Other

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abstract = "We study the informativeness of trades via discount and full-service retail brokers. We find that trades via full-service retail brokers are statistically and economically more informative than are trades via discount retail brokers. This finding holds in every year over the 12-year sample period and in various subsamples. We also find that past returns, volatility, and news announcements positively relate to the net volume of discount retail brokers, but these variables are unrelated to the net volume of full-service retail brokers. Our results suggest that broker type selection bias is an important consideration in studying individual investors' trades.",

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AB - We study the informativeness of trades via discount and full-service retail brokers. We find that trades via full-service retail brokers are statistically and economically more informative than are trades via discount retail brokers. This finding holds in every year over the 12-year sample period and in various subsamples. We also find that past returns, volatility, and news announcements positively relate to the net volume of discount retail brokers, but these variables are unrelated to the net volume of full-service retail brokers. Our results suggest that broker type selection bias is an important consideration in studying individual investors' trades.

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Individual investors and broker types

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