The Geography of Investor Attention

Stefano Mengoli, Marco Pagano and Pierpaolo Pattitoni

The Review of Corporate Finance Studies, 2025, vol. 14, issue 3, 752-803

Abstract: Local companies attract significantly more attention from investors than nonlocal companies, especially at times of news releases and high volatility. This attention gap widens especially when news is firm-specific rather than aggregate, and in response to idiosyncratic rather than market risk. Attention is causally related to perceived proximity: after a firm is acquired by a nonlocal one, local investors, compared with nonlocal investors, are more likely to reallocate attention away from it; conversely, COVID-19 travel restrictions led investors to reallocate attention toward local companies and away from nonlocal ones, especially those difficult to reach. Finally, local attention predicts volatility, bid-ask spreads, and nonlocal attention, but not vice versa. Our findings suggest that the geography of attention matters and is shaped by local investors’ information-processing advantage, not familiarity bias. (JEL D83, G11, G12, G14, L86, R32)

Date: 2025
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