Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/87721
Authors: 
Fecht, Falko
Hackethal, Andreas
Karabulut, Yigitcan
Year of Publication: 
2013
Series/Report no.: 
Discussion Paper, Deutsche Bundesbank 42/2013
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.
Subjects: 
conflict of interests
universal banks
proprietary trading
retail investment
retail banking
JEL: 
G30
G32
ISBN: 
978-3-86558-970-5
Document Type: 
Working Paper

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