Language and culture are key

Undertaken by Harald Hau of the CEPR's international macroeconomics programme, the research focused on traders dealing German shares.

Hau found traders based outside Germany to be much less profitable than their German counterparts.

Within the subset of traders outside Germany, those that fared the worst were unable to speak German.

According to Hau, the quarterly underperformance of non-German speaking traders outside Germany is equivalent to DM1.2m (€614,000) per actively traded account.

Working in a non-German speaking city but trading German stocks, would not seem to augur well for profitability.

The solution? Learn the language and assimilate the culture. Hau's findings suggested that the disadvantages of not being in Germany were mitigated by linguistic ability.

Traders able to speak German performed equally well, regardless of their proximity to Germany.