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
Date Written: March 8, 2021
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: Suggested Citation