Social Connectedness and Local Stock Return Comovement

35 Pages Posted: 30 Sep 2022

See all articles by Jared DeLisle

Jared DeLisle

Utah State University - Huntsman School of Business

Andrew R. Grant

University of Sydney Business School - Discipline of Finance; Financial Research Network (FIRN)

Ruiqi Mao

University of Sussex Business School; University of Sydney Business School

Date Written: September 26, 2022

Abstract

We explore the role of social connectedness in explaining the stock return comovement with the local portfolio. Using the Facebook Social Connectedness Index, we find the firms headquartered in the county with the higher average social connectedness with other counties exhibit lower local return comovement. Further, we explore the relationships between county-level social capital and social connectedness in affecting the local return comovement. Consistent with the information view of comovement (Veldkamp, 2006), we find the effects of social connectedness on local return comovement are more pronounced among the firms with higher pricing difficulties or during the periods with lower information production.

Keywords: Social Interactions, Social Connectedness, Return Comovement, Local Bias, Information Diffusion

JEL Classification: G12, G14, G41

Suggested Citation

DeLisle, R. Jared and Grant, Andrew R. and Mao, Ruiqi, Social Connectedness and Local Stock Return Comovement (September 26, 2022). Available at SSRN: https://ssrn.com/abstract=4230572 or http://dx.doi.org/10.2139/ssrn.4230572

R. Jared DeLisle (Contact Author)

Utah State University - Huntsman School of Business ( email )

3500 Old Main Hill
Logan, UT 84322-3500
United States
4357972310 (Phone)

Andrew R. Grant

University of Sydney Business School - Discipline of Finance ( email )

H69 Codrington Business School Building
Sydney, NSW 2006
Australia
61-2-9036-6238 (Phone)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Ruiqi Mao

University of Sussex Business School ( email )

Jubilee Building
Falmer
Brighton, BN1 9SN
United Kingdom

University of Sydney Business School ( email )

University of Sydney
Sydney, NSW 2006
Australia

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