IDEAS home Printed from https://ideas.repec.org/a/bla/jfinan/v56y2001i5p1959-1983.html
   My bibliography  Save this article

Location Matters: An Examination of Trading Profits

Author

Listed:
  • Harald Hau

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.

Suggested Citation

  • Harald Hau, 2001. "Location Matters: An Examination of Trading Profits," Journal of Finance, American Finance Association, vol. 56(5), pages 1959-1983, October.
    • Handle: RePEc:bla:jfinan:v:56:y:2001:i:5:p:1959-1983
    DOI: 10.1111/0022-1082.00396
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/0022-1082.00396
    Download Restriction: no
    File URL: https://libkey.io/10.1111/0022-1082.00396?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jfinan:v:56:y:2001:i:5:p:1959-1983. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/afaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.