Do Individual Investors Have Asymmetric Information Based on Work Experience?
Norwegian School of Economics (NHH) - Department of Finance and Management Science
Hans K. Hvide
University of Bergen - Department of Economics; University of Aberdeen - Business School; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)
CEPR Discussion Paper No. DP7428
Using a novel and unique dataset from Norway, we analyze whether professional proximity is associated with asymmetric information and abnormal returns. We find that individuals hold an excess weight in stocks that are professionally close. For example, after excluding holdings of own-company and previous employer stock, investors on average hold 11% of their portfolio in stocks within their two-digit industry of employment. We find no evidence that investments in professionally close stocks are associated with a positive abnormal return in either the short or the long term. In some specifications, we find evidence of a negative abnormal return. We conclude there is no evidence of professional proximity being associated with asymmetric information and abnormal returns.
Number of Pages in PDF File: 38
Keywords: asymmetric information, behavioral finance, familiarity, household finance
JEL Classification: D83, G11, J24working papers series
Date posted: September 8, 2009
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