Is proprietary trading detrimental to retail investors?

Falko Fecht, Andreas Hackethal and Yigitcan Karabulut

No 42/2013, Discussion Papers from Deutsche Bundesbank

Abstract: We study a conflict of interest faced by universal banks that conduct proprietary trading alongside their retail banking services. Our dataset contains the stock holdings of each and every German bank and of their corresponding retail clients. We investigate (i) whether banks deliberately push stocks from their proprietary portfolios into their retail customer portfolios, (ii) whether those stocks subsequently underperform, and (iii) whether retail customers of banks with proprietary trading earn lower long-term portfolio returns than their peers. We present affirmative evidence on all three questions and conclude that proprietary trading can, in fact, be very detrimental to retail investors.

Keywords: conflict of interests; universal banks; proprietary trading; retail investment; retail banking (search for similar items in EconPapers)
JEL-codes: G30 G32 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-ban
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Citations: View citations in EconPapers (8)

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Journal Article: Is Proprietary Trading Detrimental to Retail Investors? (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:422013

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