The Firm Next Door: Using Satellite Images to Study Local Information Advantage

Journal of Accounting Research, Forthcoming

49 Pages Posted: 2 Aug 2019 Last revised: 19 May 2021

See all articles by Jung Koo Kang

Jung Koo Kang

Harvard Business School

Lorien Stice-Lawrence

University of Southern California - Marshall School of Business

Yu Ting Forester Wong

University of Southern California - Leventhal School of Accounting

Multiple version iconThere are 2 versions of this paper

Date Written: March 8, 2021

Abstract

We use novel satellite data that track the number of cars in the parking lots of 92,668 stores for 71 publicly listed U.S. retailers to study the local information advantage of institutional investors. We establish car counts as a timely measure of store-level performance and find that institutional investors adjust their holdings in response to the performance of local stores, and that these trades are profitable on average. These results suggest that local investors have an advantage when processing information about nearby operations. However, some institutional investors do not adjust for the quality of their local information and continue to rely on local signals even when they are poor predictors of firm performance and returns. This overreliance on poor local information is reduced for institutional investors with greater industry expertise and those with greater incentives to maximize short-term trading profits.

Keywords: satellite images, store-level performance, institutional investors, local advantage, overweighting, processing costs, alternative data, big data, emerging technologies

JEL Classification: M40, M41, G23, G30, G40, G41, K00, L81, M48, O33

Suggested Citation

Kang, Jung Koo and Stice-Lawrence, Lorien and Wong, Yu Ting Forester, The Firm Next Door: Using Satellite Images to Study Local Information Advantage (March 8, 2021). Journal of Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3428774 or http://dx.doi.org/10.2139/ssrn.3428774

Jung Koo Kang

Harvard Business School ( email )

Boston, MA 02163
United States

Lorien Stice-Lawrence

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA California 90089
United States

Yu Ting Forester Wong (Contact Author)

University of Southern California - Leventhal School of Accounting ( email )

Los Angeles, CA 90089-0441
United States

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