Information and Geography: Evidence from the German Stock Market

27 Pages Posted: 20 Oct 1999

See all articles by Harald Hau

Harald Hau

University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: October 1999

Abstract

The electronic trading system Xetra of the German Security Exchange provides a unique data source on the equity trades of 453 large traders located in 23 different cities and 8 European countries. We explore information asymmetries across the trader population: Traders located outside Germany in non-German speaking cities show lower proprietary trading profits. Their underperformance is not only statistically significant, it is also of economically significant magnitude and occurs for large blue chip stocks. We also examine if a trader location in Frankfurt as the financial center or local proximity of the trader to the corporate headquarter of the traded stock or affiliation with a large financial institution results in superior trading performance. The data provides no evidence for a 'financial center advantage.' But the data show decreasing 'institutional scale economies' and an information advantage due to corporate headquarter proximity for high frequency (intra-day) trading.

JEL Classification: F3, G1, G14, G15

Suggested Citation

Hau, Harald, Information and Geography: Evidence from the German Stock Market (October 1999). Available at SSRN: https://ssrn.com/abstract=182532 or http://dx.doi.org/10.2139/ssrn.182532

Harald Hau (Contact Author)

University of Geneva - Geneva Finance Research Institute (GFRI) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, Geneva 1211
Switzerland

Swiss Finance Institute

Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
336
Abstract Views
1,816
Rank
163,955
PlumX Metrics