Local Does as Local Is: Information Content of the Geography of Individual Investors' Common Stock Investments / Scott Weisbenner, Zoran Ivkovich.

Format:

Book

Author/Creator:

Weisbenner, Scott.

Contributor:

National Bureau of Economic Research.

Ivkovich, Zoran.

Series:

Working Paper Series (National Bureau of Economic Research) no. w9685.

NBER working paper series no. w9685

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Local Does as Local Is

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2003.

Summary:

Using a data set on the investments made by a large number of retail investors from 1991 to 1996, we find that households exhibit a strong preference for local investment - the average household invests nearly a third of their portfolio in firms headquartered within 250 miles. We test whether this locality bias is driven by information or by simple familiarity. The average household generates an additional return of 3.7% per year from its local holdings relative to its non-local holdings, suggesting local investors are able to exploit local knowledge. The excess return to investing locally is even larger among stocks not in the S&P 500 index (firms where informational asymmetries between local and non-local investors may be largest), while there is no excess return earned by households that invest in local S&P 500 stocks.

Notes:

Print version record

May 2003.