Has Local Informational Advantage Disappeared?

47 Pages Posted: 30 Apr 2016 Last revised: 13 Oct 2018

See all articles by Gennaro Bernile

Gennaro Bernile

University of Miami - Department of Finance

Alok Kumar

University of Miami - School of Business Administration

Johan Sulaeman

National University of Singapore (NUS) - Department of Finance

Qin Emma Wang

Oklahoma State University - Tulsa

Date Written: June 30, 2018

Abstract

This study examines how changes in the information environment affect the informational advantage of geographically proximate agents. We find that the long-term advantage of local agents disappeared at the turn of the millennium. This is accompanied by the reduction in local bias of institutional investors and equity analysts. However, institutional investors continue to trade local stocks disproportionately more often than nonlocal stocks; moreover, their local trades outperform nonlocal trades in the short term -- even for large and liquid stocks. Our results are consistent with improvements in the information environment shortening the horizon of geographic proximity-based informational advantage.

Keywords: Institutional investors; equity analysts; local bias; informational advantage

JEL Classification: G11, G14, G23

Suggested Citation

Bernile, Gennaro and Kumar, Alok and Sulaeman, Johan and Wang, Qin Emma, Has Local Informational Advantage Disappeared? (June 30, 2018). Available at SSRN: https://ssrn.com/abstract=2772127 or http://dx.doi.org/10.2139/ssrn.2772127

Gennaro Bernile

University of Miami - Department of Finance ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States

Alok Kumar

University of Miami - School of Business Administration ( email )

514 Jenkins Building
Department of Finance
Coral Gables, FL 33124-6552
United States
305-284-1882 (Phone)

HOME PAGE: http://moya.bus.miami.edu/~akumar

Johan Sulaeman (Contact Author)

National University of Singapore (NUS) - Department of Finance ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

HOME PAGE: http://sites.google.com/site/johansulaeman/

Qin Emma Wang

Oklahoma State University - Tulsa ( email )

700 North Greenwood
NH 320
Tulsa, OK 74106
United States
918-594-8394 (Phone)
918-594-8281 (Fax)

HOME PAGE: http://spears.okstate.edu/profiles/?id=626

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