Local institutional investors, information asymmetries, and equity returns

Bok Baik, Jun-Koo Kang and Jin-Mo Kim

Journal of Financial Economics, 2010, vol. 97, issue 1, 81-106

Abstract: We examine the informational role of geographically proximate institutions in stock markets. We find that both the level of and change in local institutional ownership predict future stock returns, particularly for firms with high information asymmetry; in contrast, such predictive abilities are relatively weak for nonlocal institutional ownership. The local advantage is especially evident for local investment advisors, high local ownership institutions, and high local turnover institutions. We also find that the stocks that local institutional investors hold (trade) earn higher excess returns around future earnings announcements than those that nonlocal institutional investors hold (trade).

Keywords: Local; institutional; ownership; Information; asymmetry; Stock; return; Investment; advisor; Informed; trading (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (166)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:97:y:2010:i:1:p:81-106

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