There is No Place Like Home: A Spatial Analysis of Investor Choice of Stock Exchange

26 Pages Posted: 17 Mar 2008 Last revised: 26 Mar 2008

See all articles by Ralph Bluethgen

Ralph Bluethgen

EBS Universität für Wirtschaft und Recht - EBS Business School

Andreas Hackethal

Goethe University Frankfurt - Faculty of Economics and Business Administration; Leibniz Institute for Financial Research SAFE

Date Written: August 2007

Abstract

We show that place of residence affects where investors trade stocks. We analyze transaction, account, and demographic data from some 19,000 retail customers of a German online brokerage house and find that investors prefer nearby stock exchanges. This local exchange bias can hardly be explained by informational advantage or lower transaction cost, but is more likely to be caused by behavioural biases. We also show that local exchange bias helps to explain equity home bias in investor portfolios. We conjecture that home bias is largely due to the behavioural biases which also underlie exchange bias. Finally, we show that independent financial advisors (IFAs) reduce both the exchange bias and the home bias of their clients. This last finding is consistent with IFAs helping their clients avoid costly investment mistakes.

Keywords: Household Finance, Behavioral Bias, Financial Advice, Spatial Analysis

JEL Classification: G11, G21

Suggested Citation

Bluethgen, Ralph and Hackethal, Andreas, There is No Place Like Home: A Spatial Analysis of Investor Choice of Stock Exchange (August 2007). Available at SSRN: https://ssrn.com/abstract=1005315 or http://dx.doi.org/10.2139/ssrn.1005315

Ralph Bluethgen (Contact Author)

EBS Universität für Wirtschaft und Recht - EBS Business School ( email )

Gustav-Stresemann-Ring 3
65189 Wiesbaden, Hessen
Germany

Andreas Hackethal

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno Platz 3
Frankfurt am Main, 60323
Germany

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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