TY - JOUR
T1 - CAN NONLOCAL TRADERS CAPTURE THE LOCAL INFORMATION ADVANTAGE AND PROFIT?
AU - Meshcheryakov, Artem
AU - Winters, Drew B.
N1 - Publisher Copyright:
© 2019 The Southern Finance Association and the Southwestern Finance Association
Copyright:
Copyright 2019 Elsevier B.V., All rights reserved.
PY - 2019/3/1
Y1 - 2019/3/1
N2 - Market makers located in geographic proximity (local) to companies possess a local information advantage that comes from access to soft information. We study whether a nonlocal trader can capture the local information advantage and profit without relocating. We develop a trading strategy for the nonlocal trader that generates “buy” and “sell” signals for stocks based on quotes of local market makers. Our findings suggest it is possible, albeit difficult, for nonlocal traders to extract local information from local market makers’ quotes. Using limit orders from buy signals, we generate up to 7.6 basis points of abnormal return per day.
AB - Market makers located in geographic proximity (local) to companies possess a local information advantage that comes from access to soft information. We study whether a nonlocal trader can capture the local information advantage and profit without relocating. We develop a trading strategy for the nonlocal trader that generates “buy” and “sell” signals for stocks based on quotes of local market makers. Our findings suggest it is possible, albeit difficult, for nonlocal traders to extract local information from local market makers’ quotes. Using limit orders from buy signals, we generate up to 7.6 basis points of abnormal return per day.
UR - http://www.scopus.com/inward/record.url?scp=85063420475&partnerID=8YFLogxK
U2 - 10.1111/jfir.12175
DO - 10.1111/jfir.12175
M3 - Article
AN - SCOPUS:85063420475
VL - 42
SP - 41
EP - 69
JO - Journal of Financial Research
JF - Journal of Financial Research
SN - 0270-2592
IS - 1
ER -