TAXI! Do Mutual Funds Pursue and Exploit Information on Local Companies?
59 Pages Posted: 3 Feb 2022 Last revised: 15 Mar 2022
Date Written: February 3, 2022
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: Suggested Citation