Location Choice, Portfolio Choice

Branikas, Ioannis; Hong, Harrison; Jia, Xuefeng

doi:10.2139/ssrn.2870680

Cited by 3 publications

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“…Third, our paper is also related to studies on geographic location and portfolio choice (e.g., Bodnaruk, ; Branikas, Hong, & Xu, ; Christos & Wang, ; Coval & Moskowitz, , ; Ivkovic & Weisbenner, ; Kang & Stulz, ). For instance, Coval and Moskowitz (, ) found that mutual fund managers in the USA had a strong bias toward nearby companies.…”

Section: Introductionmentioning

confidence: 99%

Does geographic location matter to stock return predictability?

Boubaker

Chkir

Chourou

et al. 2018

Journal of Forecasting

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Building on recent and growing evidence that geographic location influences information diffusion, this paper examines the relation between firm's location and the predictability of stock returns. We hypothesize that returns on a portfolio composed of firms located in central areas are more likely to follow a random walk than returns on a portfolio composed of firms located in remote areas. Using a battery of variance ratio tests, we find strong and robust support for our prediction. In particular, we show that the returns on a portfolio composed of the 500 largest urban firms follow a random walk; however, all variance ratio tests reject the random walk hypothesis for a portfolio that includes the 500 largest rural firms. Our results are robust to alternative definitions of firm's location and portfolio formation.

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Section: Introductionmentioning

confidence: 99%

Does geographic location matter to stock return predictability?

Boubaker

Chkir

Chourou

et al. 2018

Journal of Forecasting

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Market Communication

Puaschunder

2022

Advances in Behavioral Economics and Finance Leadership

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Behavioral Household Finance

Beshears

Choi

Laibson

et al. 2018

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This chapter provides an overview of household finance. The first part summarizes key facts regarding household financial behavior, emphasizing empirical regularities that are inconsistent with the standard classical economic model and discussing extensions of the classical model and explanations grounded in behavioral economics that can account for the observed patterns. This part covers five topics: consumption and savings, borrowing, payments, asset allocation, and insurance. The second part addresses interventions that firms, governments, and other parties deploy to shape household financial outcomes: education and information, peer effects and social influence, product design, advice and disclosure, choice architecture, and interventions that directly target prices or quantities. This chapter is divided into two parts, each of which is further divided into several sections. The first part summarizes key facts regarding household financial behavior, emphasizing empirical regularities that are inconsistent with the standard classical economic model and discussing both extensions of the classical model and explanations grounded in behavioral economics that can account for the observed patterns. This part covers five topics: (I) consumption and savings, (II) borrowing, (III) payments, (IV) asset allocation, and (V) insurance. The second part addresses interventions that firms, governments, and other parties deploy to shape household financial outcomes: (VI) education and information, (VII) peer effects and social influence, (VIII) product design, (IX) advice and disclosure, (X) choice architecture, and (XI) interventions that directly target prices or quantities. The final section of the paper (XII) concludes. John BeshearsWe offer broad coverage of the household finance literature, but we limit the scope of our discussion along some dimensions. We focus on the U.S. institutional context and on empirical work based on U.S. data, although we do bring evidence from other wealthy countries to bear when germane and occasionally reference evidence from developing countries. We address household asset allocation but do not draw out its implications for asset pricing, which are covered by the asset pricing chapter in this handbook. Although household decisions regarding health care are relevant to household finance, we largely omit this literature from our chapter because it is covered in depth in the chapter on behavioral health economics. Finally, there is some overlap between our section on financial product design and the chapter on behavioral industrial organization; we refer readers to that chapter for related material on that topic. Part 1: Facts I. Consumption and SavingsBeginning with the seminal work of Modigliani and Brumberg (1954) and Friedman (1957), economists have embraced the view that households choose to save and borrow to smooth consumption over the lifecycle. Intuitively, if agents have concave utility functions over consumption, then they should spread consumption across time to optimally...

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Location Choice, Portfolio Choice

Cited by 3 publications

References 50 publications

Does geographic location matter to stock return predictability?

Does geographic location matter to stock return predictability?

Market Communication

Behavioral Household Finance

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