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
Date Written: July 3, 2019
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: Suggested Citation