Information immobility, industry concentration, and institutional investors’ performance

Mark Fedenia, Sherrill Shafer and Hilla Skiba

Journal of Banking & Finance, 2013, vol. 37, issue 6, 2140-2159

Abstract: This paper examines foreign institutional investors’ portfolio allocation and performance in US securities. We test how information immobility, proxied by information barriers between the investors’ home markets and the US, influences portfolio strategies. Consistent with theoretical predictions, foreign institutional investors’ total investment in the US is negatively related to information immobility. Similarly, information immobility is a significant driver of portfolio under-diversification across industries. Industry concentration has declined over time, consistent with declining search costs. Industry-concentrated portfolios outperform more diversified portfolios for both foreign and US institutional investors. Concentration especially helps institutional investors with the easiest access to information.

Keywords: International diversification; Portfolio performance; Industry concentration; Culture; Home bias (search for similar items in EconPapers)
JEL-codes: G11 G15 G23 Z10 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:6:p:2140-2159

DOI: 10.1016/j.jbankfin.2013.01.034

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