[This article investigates the information content of signals about the identity of investors and their role in price formation. Whereas we document that investors use multiple brokers, broker identity is nevertheless a powerful signal about the identity of investors who initiate trades. The market also correctly processes this signal: the permanent price impact of orders coming from different brokers fits the information profile of the investors associated with these brokers. Our results suggest that an increase in the degree of anonymity may render order flow less informative, which could explain why the literature has documented liquidity improvements in exchanges that reduce transparency.]

This article investigates the information content of signals about the identity of investors and their role in price formation. Whereas we document that investors use multiple brokers, broker identity is nevertheless a powerful signal about the identity of investors who initiate trades. The market also correctly processes this signal: the permanent price impact of orders coming from different brokers fits the information profile of the investors associated with these brokers. Our results suggest that an increase in the degree of anonymity may render order flow less informative, which could explain why the literature has documented liquidity improvements in exchanges that reduce transparency.

ABSTRACT This paper provides evidence of informed trading by individual investors around earnings announcements using a unique data set of NYSE stocks. We show that intense aggregate individual investor buying (selling) predicts large positive (negative) abnormal returns on and after earnings announcement dates. We decompose abnormal returns following the event into information and liquidity provision components, and show that about half of the returns can be attributed to private information. We also find that individuals trade in both return‐contrarian and news‐contrarian manners after earnings announcements. The latter behavior has the potential to slow the adjustment of prices to earnings news.