Local Ownership, Crises, and Asset Prices: Evidence from US Mutual Funds
Review of Finance, Forthcoming
56 Pages Posted: 2 May 2012 Last revised: 28 Oct 2018
Date Written: June 3, 2015
We exploit the domestic portfolios of US mutual funds to provide microeconomic evidence that investors are more likely to liquidate geographically remote investments at times of high aggregate market volatility. This has important implications for asset prices. The valuations of stocks with ex ante less local ownership decline more when aggregate market volatility is high. Furthermore, the returns of stocks with geographically distant owners are more exposed to changes in aggregate market volatility.
Keywords: Home bias, local bias, mutual funds, stock market, aggregate market volatility
JEL Classification: F4, G02, G11
Suggested Citation: Suggested Citation