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Local information concentration and stock price informativeness

Author

Listed:
  • Michael Hyman
  • Scott Duellman

Abstract

Investors have been shown to gather local information, which allows for superior investment returns. We document that when the local information landscape is less dispersed and local information is concentrated on fewer firms, stock prices better align with future earnings. These findings are clustered in small firms, firms in rural communities, and firms with low institutional ownership, suggesting that local information's ability to be priced into earnings is strongest in regions where information is otherwise unavailable. Overall, we show that the ability of local information to be utilised is dependent both on the amount of local information available to investors and the resources available to investors to capitalise on the information.

Suggested Citation

  • Michael Hyman & Scott Duellman, 2021. "Local information concentration and stock price informativeness," American Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 6(3/4), pages 201-222.
    • Handle: RePEc:ids:amerfa:v:6:y:2021:i:3/4:p:201-222
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