Location and Trading Performance in Electronic Markets

Abstract:     
We examine the performance of electronic stock traders who are dispersed geographically throughout the United States. When traders located in and outside of the New York City (financial center) area trade the same stock at the same time, financial center traders perform better. Overall, we find that financial center traders generate trading profits more than four times larger than nonfinancial center traders. Our results suggest that more-skillful traders choose to locate in New York and that a trader’s actual location is important, even in fully electronic markets.

Number of Pages in PDF File: 8

JEL Classification: G11

Accepted Paper Series