Brokers and Order Flow Leakage: Evidence from Fire Sales

Andrea Barbon, Marco Di Maggio, Francesco Franzoni and Augustin Landier

Journal of Finance, 2019, vol. 74, issue 6, 2707-2749

Abstract: Using trade‐level data, we study whether brokers play a role in spreading order flow information in the stock market. We focus on large portfolio liquidations that result in temporary price drops, and identify the brokers who intermediate these trades. These brokers’ clients are more likely to predate on the liquidating funds than to provide liquidity. Predation leads to profits of about 25 basis points over 10 days and increases the liquidation costs of the distressed fund by 40%. This evidence suggests a role of information leakage in exacerbating fire sales.

Date: 2019
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Citations: View citations in EconPapers (30)

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https://doi.org/10.1111/jofi.12840

Related works:
Working Paper: Brokers and Order Flow Leakage: Evidence from Fire Sales (2018)
Working Paper: Brokers and Order Flow Leakage: Evidence from Fire Sales (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:74:y:2019:i:6:p:2707-2749

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