The Geography of Information Acquisition

Journal of Financial and Quantitative Analysis

81 Pages Posted: 24 Apr 2019 Last revised: 29 Nov 2021

See all articles by Honghui Chen

Honghui Chen

Department of Finance, University of Central Florida

Yuanyu Qu

University of International Business and Economics (UIBE) - School of Banking and Finance

Tao Shen

Tsinghua University

Qinghai Wang

University of Central Florida - College of Business Administration

David Xiaoyu Xu

University of Texas at Austin; University of Texas at Austin - Department of Finance

Date Written: November 12, 2019

Abstract

Using detailed data on company visits by Chinese mutual funds, we provide direct evidence of mutual fund information acquisition activities and the consequent informational advantages mutual funds establish in local firms. Mutual funds are more likely to visit local and nearby firms both in and outside of their portfolios, but the ease of travel between fund and firm locations can substantially alleviate geographic distance constraints. Company visits by mutual funds are strongly associated with both fund trading activities and fund trading performance. Our results show that geographic constraints and costly information acquisition amplify information asymmetry in financial markets.

Keywords: mutual funds, information acquisition, local bias, portfolio choice

JEL Classification: G11, G23

Suggested Citation

Chen, Honghui and Qu, Yuanyu and Shen, Tao and Wang, Qinghai and Xu, David and Xu, David, The Geography of Information Acquisition (November 12, 2019). Journal of Financial and Quantitative Analysis, Available at SSRN: https://ssrn.com/abstract=3371978 or http://dx.doi.org/10.2139/ssrn.3371978

Honghui Chen

Department of Finance, University of Central Florida ( email )

PO Box 161400
Orlando, FL 32816
United States
407-823-0895 (Phone)

Yuanyu Qu

University of International Business and Economics (UIBE) - School of Banking and Finance ( email )

No.10, Huixindong Street
Chaoyang District
Beijing, 100029
China

Tao Shen (Contact Author)

Tsinghua University ( email )

Department of Finance
School of Economics and Management
China

Qinghai Wang

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

PO Box 161400
Orlando, FL 32816
United States

David Xu

University of Texas at Austin ( email )

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States

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