Work

Home away from Home: Geography of Information and Local Investors

Year: 2015

Type: article

Abstract: We develop a 10-K-based multidimensional measure of firm locations. Using this measure, we show that firm-level information is geographically distributed and institutional investors are able to exploit the resulting information asymmetry. Specifically, institutional investors overweigh firms whose 10-K frequently mentions the investors' state even when those firms are not headquartered locally and earn superior returns on those stocks. These ownership and performance patterns are stronger among hard-to-value firms. Local investor performance increases with the degree of local bias and with the local economic exposure of portfolio firms. Overall, geographical variation in firm-level information generates economically significant location-based information asymmetry.

Source: Review of Financial Studies

DOI: 10.1093/rfs/hhv004

Authors: Gennaro Bernile, Alok Kumar, Johan Sulaeman

Institutions: Singapore Management University, University of Miami, National University of Singapore, Southern Methodist University

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W3124052255

FWCI: 30.63

Cites: 34

Cited by: 241

Related to: 10