Attention, Acquisition Costs, or Executive Information? Using Satellite Data to Uncover the Sources of Local Information

58 Pages Posted: 2 Aug 2019 Last revised: 9 Aug 2019

See all articles by Jung Koo Kang

Jung Koo Kang

University of Southern California - Marshall School of Business

Yu Ting Forester Wong

University of Southern California - Leventhal School of Accounting

Lorien Stice-Lawrence

University of Southern California - Marshall School of Business

Date Written: July 3, 2019

Abstract

We use novel satellite data which track the number of cars in the parking lots of 101,471 stores for 71 publicly listed U.S. retailers over the years 2009 to 2018 to explore the sources of local information. We establish car counts as a timely measure of the performance of individual stores and examine the extent to which local investors obtain information through: decreased costs of information acquisition (Acquisition Cost Channel), information obtained directly from firm management (Executive Information Channel), and increased attention (Increased Attention Channel). Our tests provide strong evidence in support of the acquisition cost channel, especially for: non-indexer investors, who we expect to be most responsive to firm information; for regions that are difficult to gather information about from a distance; and for regions where social networks are especially tightknit. We find no evidence of the executive information or increased attention channels. In an era when the common perception is that “the world is flat” and the costs to acquire information are decreasing, especially for large institutional investors, we find these results surprising and important to consider when making policy decisions about how or whether to close this gap.

Keywords: Acquisition Cost, Local Information, Local Information Advantage, Local Information Gap, Executive Information, Insider Trading, Attention, Institutional Trading, Institutional Investors, Satellite Image, Satellite Data, Car Count

JEL Classification: K40, M48, M41, O31

Suggested Citation

Kang, Jung Koo and Wong, Yu Ting Forester and Stice-Lawrence, Lorien, Attention, Acquisition Costs, or Executive Information? Using Satellite Data to Uncover the Sources of Local Information (July 3, 2019). Available at SSRN: https://ssrn.com/abstract=3428774 or http://dx.doi.org/10.2139/ssrn.3428774

Jung Koo Kang

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

701 Exposition Blvd
Los Angeles, CA 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

Lorien Stice-Lawrence

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

701 Exposition Blvd
Los Angeles, CA 90089
United States

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