Local News and the Change in Local Portfolios
55 Pages Posted: 27 Jul 2016 Last revised: 30 Oct 2017
Date Written: October 29, 2017
This paper tests the investor attention hypothesis and shows that local individual investors are significant net buyers of local stocks that are in the local news. Significant reversal effects on portfolio change are observed. Interestingly, for the given local news, non-locals change their portfolios in the local stocks by 6% on average. The tone of news amplifies the effect by 7%. Taken together, local media seems to decrease the information search costs of investors, particularly non-locals, thus leading to a decrease in information asymmetry between local and non-local investors.
Keywords: local media, local trades, investor attention hypothesis, information asymmetry
JEL Classification: G11, G14
Suggested Citation: Suggested Citation