Is Human-Interaction-based Information Substitutable?

62 Pages Posted: 11 May 2021 Last revised: 22 Jun 2023

See all articles by Jennie Bai

Jennie Bai

Georgetown University - McDonough School of Business; National Bureau of Economic Research (NBER)

Massimo Massa

INSEAD - Finance

Multiple version iconThere are 2 versions of this paper

Date Written: June 22, 2023


We study information substitutability in the financial market through a quasi-natural experiment: the pandemic-triggered lockdown that has hampered people's physical interactions hence the ability to collect, process, and transmit interaction-based information. Exploiting the cross-sectional and time-series variations of lockdown and its implications on proximate investment, we investigate how the difficulty of collecting information through physical interactions has prompted a switch to electronic interactions including synchronous interactions such as virtual meetings and asynchronous ones like collecting information from the internet. We show that local-investing funds (LIFs) that mostly relied on physical interactions to access information before the pandemic had even worse performance than other funds, though the difference in performance was insignificant before the lockdown. Moreover, LIFs rebalance portfolios toward faraway stocks due to portfolio diversification and risk reduction. These findings indicate that physical-interaction-based and electronic-based information is not fully substitutable. We also show that the advantages of human-interaction-based information originate mainly from physical contacts, primarily in cafés, restaurants, bars, and fitness centers; and the virtual world based on Zoom/Skype/Team can provide a buffer but cannot substitute personal meetings in generating sufficient information.

Keywords: Information substitutability, human interactions, synchronous interactions, asynchronous interactions, COVID-19, proximity investment, mutual funds

JEL Classification: G12, G14, G23

Suggested Citation

Bai, Jennie and Massa, Massimo, Is Human-Interaction-based Information Substitutable? (June 22, 2023). Georgetown McDonough School of Business Research Paper No. 3843782, INSEAD Working Paper No. 2023/30/FIN, Available at SSRN: or

Jennie Bai (Contact Author)

Georgetown University - McDonough School of Business ( email )

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National Bureau of Economic Research (NBER) ( email )

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Massimo Massa

INSEAD - Finance ( email )

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+33 1 6072 4045 (Fax)

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