There's No Place Like Home: Information Asymmetries, Local Asset Concentration, and Portfolio Returns

49 Pages Posted: 13 Mar 2017 Last revised: 1 Mar 2018

See all articles by David C. Ling

David C. Ling

University of Florida - Warrington College of Business Administration

Andy Naranjo

University of Florida - Warrington College of Business Administration

Benjamin Scheick

Villanova University - Department of Finance

Date Written: February 27, 2018

Abstract

We provide robust evidence showing local information plays a significant role in local asset concentrations and return outperformance. Using a unique setting with significant cross-market information asymmetries and large sample of individual commercial property holdings, we find property portfolio managers concentrate an economically significant portion of their portfolios in their headquarter location. We further document a significant positive relation between local concentration and portfolio returns in markets where information asymmetry is most severe. Through numerous robustness and loan-level identification tests, we further confirm an information-based channel of asset concentration and return effects that is distinct from risk-based or behavioral explanations.

Keywords: Asset Concentration, Information Asymmetry, Home Bias, Location, Real Estate Returns

JEL Classification: D82, G11, R3

Suggested Citation

Ling, David Curtis and Naranjo, Andy and Scheick, Benjamin, There's No Place Like Home: Information Asymmetries, Local Asset Concentration, and Portfolio Returns (February 27, 2018). Available at SSRN: https://ssrn.com/abstract=2931011 or http://dx.doi.org/10.2139/ssrn.2931011

David Curtis Ling

University of Florida - Warrington College of Business Administration ( email )

P.O. Box 117168
Gainesville, FL 32611
United States
352-392-9307 (Phone)
352-392-0301 (Fax)

Andy Naranjo

University of Florida - Warrington College of Business Administration ( email )

P.O. Box 117168
Gainesville, FL 32611-7168
United States
352-392-3781 (Phone)

Benjamin Scheick (Contact Author)

Villanova University - Department of Finance ( email )

United States

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