Journal ArticleDOI
Location Matters: An Examination of Trading Profits
TLDR
In this article, the authors explore informational asymmetries across the trader population: traders located outside Germany in non-German-speaking cities show lower proprietary trading profit and their underperformance is statistically significant, it is also of economically significant magnitude and occurs for the 11 largest German blue-chip stocks.Abstract:
The electronic trading system Xetra of the German Security Exchange provides a unique data source on the equity trades of 756 professional traders located in 23 different cities and eight European countries. We explore informational asymmetries across the trader population: Traders located outside Germany in non-German-speaking cities show lower proprietary trading profit. Their underperformance is not only statistically significant, it is also of economically significant magnitude and occurs for the 11 largest German blue-chip stocks. We also examine whether a trader location in Frankfurt as the financial center, or local proximity of the trader to the corporate headquarters of the traded stock, or affiliation with a large financial institution results in superior trading performance. The data provide no evidence for a financial center advantage or of increasing institutional scale economies in proprietary trading. However, we find evidence for an information advantage due to corporate headquarters proximity for high-frequency (intraday) trading.read more
Citations
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Journal ArticleDOI
The determinants of cross-border equity flows
TL;DR: In this paper, the authors explore a new panel data set on bilateral gross cross-border equity flows between 14 countries, 1989-1996, and show that a "gravity" model explains international transactions in financial assets at least as well as goods trade transactions.
Journal ArticleDOI
Distance and Private Information in Lending
Sumit Agarwal,Robert Hauswald +1 more
TL;DR: In this paper, the authors study the effects of physical distance on the acquisition and use of private information in informationally opaque credit markets and show that borrower proximity facilitates the collection of soft information, leading to a trade-off in the availability and pricing of credit, which is more readily accessible to nearby firms albeit at higher interest rates ceteris paribus.
Journal ArticleDOI
Distance, Lending Relationships and Competition
Hans Degryse,Steven Ongena +1 more
TL;DR: In this paper, the authors study the effect on loan conditions of geographical distance between firms, the lending bank, and all other banks in the vicinity, and report the first comprehensive evidence on the occurrence of spatial price discrimination in bank lending.
Journal ArticleDOI
The Determinants of Cross-Border Equity Flows
TL;DR: The authors applied a new approach to a new panel data set on bilateral gross cross-border equity flows between 14 countries, 1989-96, and found that the geography of information heavily determines the pattern of international transactions.
Posted Content
Information Immobility and the Home Bias Puzzle
TL;DR: In this article, the authors model investors, endowed with a small home information advantage, who choose what information to learn before they invest, and find that even when home investors can learn what foreigners know, they choose not to: Investors profit more from knowing information others do not know.
References
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Book
Econometric Analysis of Panel Data
TL;DR: In this article, the authors proposed a two-way error component regression model for estimating the likelihood of a particular item in a set of data points in a single-dimensional graph.
Journal ArticleDOI
Time series analysis
TL;DR: A ordered sequence of events or observations having a time component is called as a time series, and some good examples are daily opening and closing stock prices, daily humidity, temperature, pressure, annual gross domestic product of a country and so on.
Journal ArticleDOI
Home Bias at Home: Local Equity Preference in Domestic Portfolios
TL;DR: The authors showed that the strong bias in favor of domestic securities is a well-documented characteristic of international investment portfolios, yet the preference for investing close to home also applies to portfolios of domestic stocks.
Journal ArticleDOI
How Distance, Language, and Culture Influence Stockholdings and Trades
Mark Grinblatt,Matti Keloharju +1 more
TL;DR: This article found that investors are more likely to hold, buy, and sell the stocks of Finnish firms that are located close to the investor, that communicate in the investor's native tongue, and that have chief executives of the same cultural background.
Related Papers (5)
Home Bias at Home: Local Equity Preference in Domestic Portfolios
The Geography of Investment: Informed Trading and Asset Prices
The investment behavior and performance of various investor types: a study of Finland's unique data set
Mark Grinblatt,Matti Keloharju +1 more