Trading Performance on Euronext: Does Location or Trading Venue Matter?

23 Pages Posted: 8 May 2011 Last revised: 12 May 2011

See all articles by Hans Degryse

Hans Degryse

KU Leuven, Department Accounting, Finance and Insurance; Centre for Economic Policy Research (CEPR)

Rudy De Winne

UCLouvain

Gunther Wuyts

KU Leuven - University of Leuven

Date Written: May 1, 2011

Abstract

We employ detailed data from all Euronext venues to investigate whether domestic traders outperform other traders. Compared with previous literature [particularly Agarwal, S., Faircloth, S., Liu, C. and Rhee, G.S., 2009, Why Do Foreign Investors Underperform Domestic Investors in Trading Activities? Evidence from Indonesia. Journal of Financial Markets 12, 32-53], the market structure includes four Euronext trading venues with an identical trading system allowing us to classify traders into domestic traders, traders from other Euronext countries familiar with the Euronext system, and foreign traders. Our analysis allows to understand which factor (location or familiarity with trading system) explains trading performance differences across trader categories. We find that domestic traders on average outperform foreign traders but perform not differently from traders from other Euronext countries. This superior performance stems from non-initiated orders both in client trades and proprietary trades. Initiated proprietary trades by domestic members also outperform foreign initiated proprietary trades. We also nd substantial heterogeneity within the three groups of domestic, other Euronext and foreign traders, with smaller traders outperforming larger traders. Finally, a regression analysis shows that our results are robust across different Euronext trading venues and different stocks.

Keywords: Traders' Performance, Local Bias

JEL Classification: G10

Suggested Citation

Degryse, Hans and De Winne, Rudy and Wuyts, Gunther, Trading Performance on Euronext: Does Location or Trading Venue Matter? (May 1, 2011). International Conference of the French Finance Association (AFFI), May 2011. Available at SSRN: https://ssrn.com/abstract=1834362

Hans Degryse (Contact Author)

KU Leuven, Department Accounting, Finance and Insurance ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Rudy De Winne

UCLouvain ( email )

Chaussée de Binche, 151
Mons, 7000
Belgium
+3265323334 (Phone)

Gunther Wuyts

KU Leuven - University of Leuven ( email )

KU Leuven - Faculty of Business and Economics
Naamsestraat 69
Leuven, Vlaams-Brabant 3000
Belgium
+3216326731 (Phone)

HOME PAGE: http://www.econ.kuleuven.be/gunther.wuyts

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