Home Away From Home: Geography of Information and Local Investors
Singapore Management University - Lee Kong Chian School of Business
University of Miami - School of Business Administration
National University of Singapore (NUS) - Department of Finance
September 11, 2013
26th Australasian Finance and Banking Conference 2013
AFA 2012 Chicago Meetings Paper
14th Annual Conference of Financial Economics and Accounting 2011
We develop a 10K-based measure of spatial variation in the availability of value-relevant information that reflects the multi-dimensional nature of firm location. Spatially distributed information generates location-based information asymmetries that affect institutional portfolio decisions and performance. Institutions overweigh firms with greater local economic exposure and earn superior returns on corresponding trades, even for firms not headquartered locally. These patterns are stronger among harder-to-value stocks. Consistent with local informational advantage, local investor performance increases with the local exposure of individual stock holdings and her portfolio as a whole, and more so when her portfolio is more heavily tilted toward local stocks.
Number of Pages in PDF File: 69
Keywords: Multi-Dimensional Firm Location, Information Asymmetry, Local Informational Advantage
JEL Classification: D82, G11, G12, G20
Date posted: November 21, 2010 ; Last revised: November 12, 2013
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