Department of Economics and Business Economics

Know thy neighbor: Political uncertainty and the informational advantage of local institutional investors

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

  • Tom Aabo
  • Suin Lee, ?University of Texas Rio Grande Valley
  • ,
  • Christos Pantzalis, Muma College of Business
  • ,
  • Jung Chul Park, Muma College of Business

Previous literature finds a positive association between short-term changes in institutional holdings (especially those of local institutions) and subsequent short-term stock performance. We contribute by investigating the importance of geographical proximity under policy uncertainty. We show that the short-term informational advantage of local institutions only thrives in areas that are either politically closely aligned with the president or where the state government (governorship and legislature) is under the control of one party. Our findings are important in understanding the avenues through which geographical proximity may provide the basis for exploitable informational advantages.

Original languageEnglish
Article number105762
JournalJournal of Banking and Finance
Volume113
Number of pages22
ISSN0378-4266
DOIs
Publication statusPublished - 2020

    Research areas

  • Institutional investors, Local bias, Political uncertainty, Retail investors, Segmented markets

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