Local institutional investors,information asymmetries,and equity returns |
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Authors: | Bok Baik Jun-Koo Kang Jin-Mo Kim |
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Affiliation: | 1. College of Business, Seoul National University, Korea;2. Division of Banking and Finance, Nanyang Business School, Nanyang Technological University, Nanyang Avenue, 639798 Singapore, Singapore;3. Department of Finance and Economics, Rutgers Business School, Rutgers University, Piscataway, NJ 08854-8054, USA |
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Abstract: | We examine the informational role of geographically proximate institutions in stock markets. We find that both the level of and change in local institutional ownership predict future stock returns, particularly for firms with high information asymmetry; in contrast, such predictive abilities are relatively weak for nonlocal institutional ownership. The local advantage is especially evident for local investment advisors, high local ownership institutions, and high local turnover institutions. We also find that the stocks that local institutional investors hold (trade) earn higher excess returns around future earnings announcements than those that nonlocal institutional investors hold (trade). |
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Keywords: | G11 G12 G14 |
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