Is Human-Interaction-based Information Substitutable? Evidence from Lockdown

65 Pages Posted: 11 May 2021 Last revised: 15 Feb 2022

See all articles by Jennie Bai

Jennie Bai

Georgetown University - Department of Finance; National Bureau of Economic Research (NBER)

Massimo Massa

INSEAD - Finance

Multiple version iconThere are 2 versions of this paper

Date Written: December 16, 2021


We study information substitutability in the financial market through a quasi-natural experiment: the pandemic-triggered lockdown that has hampered people's physical interactions and hence the ability to collect, process, and transmit human-interaction-based information. Exploiting the cross-sectional and time-series variation of lockdown and its implications for proximate investment, we investigate how the difficulty of using human-interaction-based information in lockdown has prompted a switch to non-interaction-based information. We show that lockdown reduces fund investment in proximate stocks and generates a portfolio rebalancing toward distant stocks. Such rebalancing negatively impacts fund performance by reducing fund raw (excess) returns an additional 0.51% (0.19%) per month during lockdown, suggesting that human-interaction-based and non-interaction-based information is not easily substitutable. Last, we show that the edge of human-interaction-based information originates preeminently from physical contacts, primarily in cafés, restaurants, bars, and fitness centers, and that the virtual world based on Zoom/Skype/Teams cannot substitute for personal meetings in generating sufficient information.

Keywords: mutual fund; soft information; COVID-19; proximity investment; lockdown

JEL Classification: G12, G14, G23

Suggested Citation

Bai, Jennie and Massa, Massimo, Is Human-Interaction-based Information Substitutable? Evidence from Lockdown (December 16, 2021). Georgetown McDonough School of Business Research Paper No. 3843782, 2021/75/FIN, Available at SSRN: or

Jennie Bai (Contact Author)

Georgetown University - Department of Finance ( email )

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United States


National Bureau of Economic Research (NBER) ( email )

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Massimo Massa

INSEAD - Finance ( email )

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F-77305 Fontainebleau Cedex
+33 1 6072 4481 (Phone)
+33 1 6072 4045 (Fax)

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