Individual investors and local bias

Research output: Contribution to journalArticlepeer-review

275 Scopus citations


The paper tests whether individuals have value-relevant information about local stocks (where " local" is defined as being headquartered near where an investor lives). Our methodology uses two types of calendar-time portfolios-one based on holdings and one based on transactions. Portfolios of local holdings do not generate abnormal performance (alphas are zero). When studying transactions, purchases of local stocks significantly underperform sales of local stocks. The underperformance remains when focusing on stocks with potentially high levels of information asymmetries. We conclude that individuals do not help incorporate information into stock prices. Our conclusions directly contradict existing studies.

Original languageEnglish (US)
Pages (from-to)1987-2010
Number of pages24
JournalJournal of Finance
Issue number5
StatePublished - Oct 2010
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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