[2008년 제 2차] Local Institutional Investors, Information Asymmetr
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게시일 :
2008-05-29
In this paper we examine the informational role of local institutional investors in stock markets. Using state identifiers as our primary measure of geographic proximity and geographically proximate institutions as a close approximation to informed investors, we show that both the level of and change in local institutional ownership predict future stock returns; in contrast, such predictive abilities are relatively weak for nonlocal institutional ownership. Moreover, the positive relation between local institutional holdings and stock performance is pronounced in firms with high information asymmetry, such as small firms, firms with high return volatility, firms with high R&D intensity, and young firms. Finally, we find that local, but not nonlocal, institutional investors begin to reduce their holdings prior to a break in a string of consecutive nonnegative quarterly earnings surprises. These findings suggest that geography proxies for the availability of information and allows local institutional investors to execute profitable trades based on their superior information.