Culture's impact on institutional investors' trading frequency

This paper examines how cross-cultural differences influence institutional investors' trading frequency within their own portfolio. We find evidence that as cultural distance between the investors and their stock holdings increases, institutions trade with lower frequency. Findings are consistent with our hypothesis that trading frequency and cultural distance are negatively related due to increasing difficulty of interpreting investment environments in culturally distant foreign markets. We also show that traders from different cultural backgrounds behave differently when faced with information asymmetry that cultural differences generate. Specifically, we show that ambiguity aversion and lower trust relate to lower trading frequencies at home and abroad.