Performance of Institutional Trading Desks: An Analysis of Persistence in Trading Costs

Amber Anand; Paul J. Irvine; Andy Puckett; Kumar Venkataraman

doi:10.1093/rfs/hhr110

Performance of Institutional Trading Desks: An Analysis of Persistence in Trading Costs

Amber Anand¹; Paul J. Irvine²; Andy Puckett³; Kumar Venkataraman⁴

¹ Syracuse University · ² University of Georgia · ³ University of Tennessee at Knoxville · ⁴ Southern Methodist University

Review of Financial Studies 2012

Using a proprietary dataset of institutional investors' equity transactions, we document that institutional trading desks can sustain relative performance over adjacent periods. We find that trading-desk skill is positively correlated with the performance of the institution's traded portfolio, suggesting that institutions that invest resources in developing execution abilities also invest in generating superior investment ideas. Although some brokers can deliver better executions consistently over time, our analysis suggests that trading-desk skill is not limited to a selection of better brokers. We conclude that the trade implementation process is economically important and can contribute to relative portfolio performance.

DOI: 10.1093/rfs/hhr110
Volume: 25 (2)
Pages: 557-598
Language: en
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