Individuals and Their Local Utility Stocks: Preference for the Familiar

We find individuals are four times more likely to purchase stocks of their local direct utility company as opposed to utility companies operating outside their state of residence. Our tests reveal that individuals do not possess superior or private information about their local utilities. Indeed, individual preference for their local utility stocks seems to be driven by preference for familiar assets, even in the presence of a desire for high dividend yields. In addition, affluence and sophistication do not reduce local bias.