 Game in another town: Geography of stock watchlists and firm valuationDayong Dong, Danling Jiang, Keke Wu and Hongquan Zhu Journal of Banking & Finance, 2024, vol. 163, issue C Abstract: Beyond a bias toward local stocks, investors prefer companies in certain cities over others. This study uses the geographic network of investor-followed stocks from stock watchlists to identify intercity investment preferences in China. We measure the city-pair connectivity by its likelihood of sharing an investor in common whose stock watchlist is highly concentrated in the firms of that city pair. We find that a higher connectivity-weighted aggregate stock demand-to-supply ratio across connected cities is associated with higher stock valuations, higher turnover, better liquidity, and lower cost of equity for firms in the focal city. The effects are robust to controls for geographic proximity and the broad investor base, are stronger among small firms, extend to stock return predictability, and imply excess intercity return comovement. Our results suggest that city connectivity revealed on the stock watchlist helps identify network factors in asset pricing. Keywords: Intercity investment preferences; Stock watchlist; Latent city network; Local bias (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:163:y:2024:i:c:s0378426624000827 DOI: 10.1016/j.jbankfin.2024.107164 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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