Marco Di Maggio and colleagues find that brokers tend to reveal the occurrence of a fire sale to their best clients, allowing them to generate significant profits by predating on the liquidating fund. Such information leakage comes at the expense of higher price impact, and leads to a more costly liquidation for the fire sale originator.

Description — Marco Di Maggio and colleagues find that brokers tend to reveal the occurrence of a fire sale to their best clients, allowing them to generate significant profits by predating on the liquidating fund. Such information leakage comes at the expense of higher price impact, and leads to a more costly liquidation for the fire sale originator.

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Title — Brokers and Order Flow Leakage: Evidence from Fire Sales

Content — Marco Di Maggio and colleagues find that brokers tend to reveal the occurrence of a fire sale to their best clients, allowing them to generate significant profits by predating on the liquidating fund. Such information leakage comes at the expense of higher price impact, and leads to a more costly liquidation for the fire sale originator.

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Date — January 11, 2018 5:00 am

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Source — http://hbswk.hbs.edu/stories-rss.aspx

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