TAXI! Do Mutual Funds Pursue and Exploit Information on Local Companies?

59 Pages Posted: 3 Feb 2022 Last revised: 15 Mar 2022

See all articles by David C. Cicero

David C. Cicero

Harbert College of Business, Auburn University

Andy Puckett

University of Tennessee, Knoxville

Albert Y. Wang

Auburn University - Department of Finance

Shen Zhang

Troy University

Date Written: February 3, 2022

Abstract

We use New York City taxi trips to identify mutual fund managers who directly gather information from local firms. Only funds that visit local companies via taxi overweight local firms in their portfolios, and firm visits are associated with superior investment performance. Local firm visits are elevated prior to earnings announcements, and mutual fund trades following firm visits predict returns and earnings surprises. The results are generally stronger when fund managers and firm executives share educational connections. These patterns suggest that funds’ local bias and investing performance are related to their efforts and ability to actively gather information.

Keywords: Local Bias, Private Information, Mutual Funds, Taxi Trips

JEL Classification: G11, G14, G23

Suggested Citation

Cicero, David C. and Puckett, Andy and Wang, Albert Y. and Zhang, Shen, TAXI! Do Mutual Funds Pursue and Exploit Information on Local Companies? (February 3, 2022). Available at SSRN: https://ssrn.com/abstract=4023626 or http://dx.doi.org/10.2139/ssrn.4023626

David C. Cicero

Harbert College of Business, Auburn University ( email )

415 Magnolia Ave.
Auburn, AL 36849
United States

Andy Puckett

University of Tennessee, Knoxville ( email )

437 Stokely Managment Center
Knoxville, TN 37996
United States

Albert Y. Wang

Auburn University - Department of Finance ( email )

315 Lowder Hall
Department of Finance
Auburn, AL 36849
United States

Shen Zhang (Contact Author)

Troy University ( email )

Troy, AL 36082
United States
(334) 808-6760 (Phone)

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