Neighbors Matter: Geographical Distance and Trade Timing in the Stock Market
22 Pages Posted: 24 Jul 2018
Date Written: July 3, 2018
The starting point of this paper is that neighboring investors may talk to each other sharing information about their transactions in stock markets, leading to similar trading behavior. We find that pairwise trade timing similarities between investor pairs are negatively associated to geographical distance between corresponding investor pairs. This suggests that local information transfer channels between neighboring individual investors are used in decision making. We also observe that differences in age and language moderate this association. The analysis is conducted using investor level data from different regions of Finland.
Keywords: investor trading, geographical distance, information transfer, private information, investor network, social interactions, behavioral finance, behavioral economics, social networks, individual investors
JEL Classification: D8, G10
Suggested Citation: Suggested Citation