How has the Relevance of Institutional Brokerage Changed?

Fong, KYL; Foster, FD; Gallagher, DR; Lee, AD

How has the Relevance of Institutional Brokerage Changed?

Fong, KYL Foster, FD Gallagher, DR

Lee, AD

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Publication Type:: Journal Article
Citation:: International Review of Finance, 2016, 16 (4), pp. 499 - 524
Issue Date:: 2016-12-01

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Field	Value	Language
dc.contributor.author	Fong, KYL	en_US
dc.contributor.author	Foster, FD	en_US
dc.contributor.author	Gallagher, DR https://orcid.org/0000-0003-4544-3916	en_US
dc.contributor.author	Lee, AD https://orcid.org/0000-0001-5984-8688	en_US
dc.date.available	2020-05-25T19:08:43Z
dc.date.issued	2016-12-01	en_US
dc.identifier.citation	International Review of Finance, 2016, 16 (4), pp. 499 - 524	en_US
dc.identifier.issn	1369-412X	en_US
dc.identifier.uri	http://hdl.handle.net/10453/77448
dc.description.abstract	© 2016 International Review of Finance Ltd. 2016 Institutional brokerage rates have been in decline. We investigate whether this reduction has coincided with a fall in benefits provided by brokers to institutional asset managers. We use trade packages from both active and passive equity funds from 1995 to 2001 and active equity funds from 2002 to 2010. We find that later period active funds recoup a combined 1.75 basis point benefit (from price impact cost recovery and short-term alpha) per basis point of brokerage cost. Later period active investors saw improved trade price impact and shorter-term alpha net benefits, relative to earlier period active investors. These results are robust after controlling for trade characteristics and cross-sectional variation over time. Our findings suggest that brokers innovate to provide valuable services in the subsequent, lower brokerage environment.	en_US
dc.relation.ispartof	International Review of Finance	en_US
dc.relation.isbasedon	10.1111/irfi.12092	en_US
dc.title	How has the Relevance of Institutional Brokerage Changed?	en_US
dc.type	Journal Article
utslib.citation.volume	4	en_US
utslib.citation.volume	16	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Finance Discipline
pubs.organisational-group	/University of Technology Sydney/Strength - QFRC - Quantitative Finance Research Centre
utslib.copyright.status	open_access
pubs.issue	4	en_US
pubs.publication-status	Published	en_US
pubs.volume	16	en_US

Abstract:

© 2016 International Review of Finance Ltd. 2016 Institutional brokerage rates have been in decline. We investigate whether this reduction has coincided with a fall in benefits provided by brokers to institutional asset managers. We use trade packages from both active and passive equity funds from 1995 to 2001 and active equity funds from 2002 to 2010. We find that later period active funds recoup a combined 1.75 basis point benefit (from price impact cost recovery and short-term alpha) per basis point of brokerage cost. Later period active investors saw improved trade price impact and shorter-term alpha net benefits, relative to earlier period active investors. These results are robust after controlling for trade characteristics and cross-sectional variation over time. Our findings suggest that brokers innovate to provide valuable services in the subsequent, lower brokerage environment.

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http://hdl.handle.net/10453/77448