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Do Individual Investors Have Asymmetric Information Based On Work Experience?

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  • Døskeland, Trond
  • Hvide, Hans K

Abstract

Using a novel and unique dataset from Norway, we analyze whether professional proximity is associated with asymmetric information and abnormal returns. We find that individuals hold an excess weight in stocks that are professionally close. For example, after excluding holdings of own-company and previous employer stock, investors on average hold 11% of their portfolio in stocks within their two-digit industry of employment. We find no evidence that investments in professionally close stocks are associated with a positive abnormal return in either the short or the long term. In some specifications, we find evidence of a negative abnormal return. We conclude there is no evidence of professional proximity being associated with asymmetric information and abnormal returns.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7428.

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Date of creation: Aug 2009
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Handle: RePEc:cpr:ceprdp:7428

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Keywords: asymmetric information; behavioral finance; familiarity; household finance;

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Cited by:
  1. Baltzer, Markus & Stolper, Oscar & Walter, Andreas, 2011. "Home-field advantage or a matter of ambiguity aversion? Local bias among German individual investors," Discussion Paper Series 1: Economic Studies 2011,23, Deutsche Bundesbank, Research Centre.
  2. Luigi Guiso & Paolo Sodini, 2012. "Household Finance. An Emerging Field," EIEF Working Papers Series 1204, Einaudi Institute for Economics and Finance (EIEF), revised Mar 2012.
  3. Hvide, Hans K. & Panos, Georgios A., 2014. "Risk tolerance and entrepreneurship," Journal of Financial Economics, Elsevier, vol. 111(1), pages 200-223.
  4. Eduardo Davila, 2014. "Optimal Financial Transaction Taxes," 2014 Meeting Papers 114, Society for Economic Dynamics.

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