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Home away from Home: Geography of Information and Local Investors

Author

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  • Gennaro Bernile
  • Alok Kumar
  • Johan Sulaeman

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.

Suggested Citation

  • Gennaro Bernile & Alok Kumar & Johan Sulaeman, 2015. "Home away from Home: Geography of Information and Local Investors," The Review of Financial Studies, Society for Financial Studies, vol. 28(7), pages 2009-2049.
    • Handle: RePEc:oup:rfinst:v:28:y:2015:i:7:p:2009-2049.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhv004
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