Local Does as Local Is: Information Content of the Geography of Individual Investors' Common Stock Investments

Zoran Ivković and Scott Weisbenner

Journal of Finance, 2005, vol. 60, issue 1, 267-306

Abstract: Using data on the investments a large number of individual investors made through a discount broker from 1991 to 1996, we find that households exhibit a strong preference for local investments. We test whether this locality bias stems from information or from simple familiarity. The average household generates an additional annualized return of 3.2% from its local holdings relative to its nonlocal holdings, suggesting that local investors can exploit local knowledge. Excess returns to investing locally are even larger among stocks not in the S&P 500 index (firms for which information asymmetries between local and nonlocal investors may be largest).

Date: 2005
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https://doi.org/10.1111/j.1540-6261.2005.00730.x

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Working Paper: Local Does as Local Is: Information Content of the Geography of Individual Investors' Common Stock Investments (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:60:y:2005:i:1:p:267-306

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