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Individual investors and broker types

journal contribution
posted on 01.04.2014, 00:00 authored by K Y L Fong, D R Gallagher, Adrian LeeAdrian Lee
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.

History

Journal

Journal of financial and quantitative analysis

Volume

49

Issue

2

Pagination

431 - 451

Publisher

Cambridge University Press

Location

Cambridge, Eng.

ISSN

0022-1090

eISSN

1756-6916

Language

eng

Publication classification

C1.1 Refereed article in a scholarly journal; C Journal article

Copyright notice

2014, Michael G. Foster School of Business, University of Washington