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Information immobility, industry concentration, and institutional investors’ performance

  • Fedenia, Mark
  • Shafer, Sherrill
  • Skiba, Hilla
Registered author(s):

    This paper examines foreign institutional investors’ portfolio allocation and performance in US securities. We test how information immobility, proxied by information barriers between the investors’ home markets and the US, influences portfolio strategies. Consistent with theoretical predictions, foreign institutional investors’ total investment in the US is negatively related to information immobility. Similarly, information immobility is a significant driver of portfolio under-diversification across industries. Industry concentration has declined over time, consistent with declining search costs. Industry-concentrated portfolios outperform more diversified portfolios for both foreign and US institutional investors. Concentration especially helps institutional investors with the easiest access to information.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0378426613000599
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    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 37 (2013)
    Issue (Month): 6 ()
    Pages: 2140-2159

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    Handle: RePEc:eee:jbfina:v:37:y:2013:i:6:p:2140-2159
    Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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