Expanding Horizons: The Effect of Information Access on Geographically Biased Investing

54 Pages Posted: 1 Mar 2018 Last revised: 5 Feb 2019

See all articles by Logan P. Emery

Logan P. Emery

Purdue University - Krannert School of Management

Huseyin Gulen

Purdue University - Krannert School of Management

Date Written: January 17, 2019

Abstract

Using investor internet access, we show that increased information access leads to decreased geographic bias in investment portfolios. With internet access improving information access, investors must choose whether to specialize or diversify their information sets, subsequently increasing or decreasing their geographic bias, respectively. We find that countries with better internet access exhibit a lower bias, potentially through a greater demand for online financial information. At the individual level, investors are more likely to invest in both international assets and more distant stocks within the U.S after starting to trade online. This effect is closely related to information availability. The evidence supports internet access reducing geographic bias through increased investor awareness, as these new holdings only provide diversification benefits. There is, however, some evidence of increased learning capacity as online investors earn superior returns for stocks that report financial information online.

Keywords: Information Asymmetry, Home Bias, Internet

JEL Classification: F21, F65, G11, O33

Suggested Citation

Emery, Logan and Gulen, Huseyin, Expanding Horizons: The Effect of Information Access on Geographically Biased Investing (January 17, 2019). Available at SSRN: https://ssrn.com/abstract=3127023 or http://dx.doi.org/10.2139/ssrn.3127023

Logan Emery

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

Huseyin Gulen (Contact Author)

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

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