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Geography and financial decision making

In: Handbook of Financial Decision Making

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  • Qinghai Wang

Abstract

Geographic preference is a pervasive feature in financial decision making. We summarize the empirical evidence on the role of geography in financial decision making and review various explanations for this puzzling phenomenon. For information based explanations of geographic preference, we emphasize the recent literature on endogenous information acquisition in investment decisions. Recent advances in social finance provide insights on the social context of economic activities. Geographic preference in investment decisions is embedded in the broad influence of social structure and social interactions on financial decision making. We discuss the role of social processes in explaining the geographic preference in financial decisions. After presenting facts on the geographic distribution of investors and firms in the United States, we discuss how the geographic dislocation between investors and firms, in combination with the geographic preference of investors in their investment decisions, generates frictions in U.S. financial markets.

Suggested Citation

  • Qinghai Wang, 2023. "Geography and financial decision making," Chapters, in: Gilles Hilary & David McLean (ed.), Handbook of Financial Decision Making, chapter 6, pages 133-153, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:21126_6
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    File URL: https://www.elgaronline.com/doi/10.4337/9781802204179.00016
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