2000/01/01 by Joshua D. Coval, Tobias J. Moskowitz · 362 citations
Business, Management and Accounting · Economics, Econometrics and Finance · #Asset (computer security) #Business #Capital asset pricing model #Corporate Finance and Governance #Economic theories and models #Economics #Finance #Financial Markets and Investment Strategies #Financial economics #Geography #Information asymmetry #Investment (military) #Monetary economics #Mutual fund #Stock (firearms)
paper · open access · doi:10.1086/322088
published in Journal of Political Economy 109(4), 811-841 (University of Chicago Press)
openalex publication_date 2001/08/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/04
Applying a geographic lens to mutual fund performance, this study finds that fund managers earn substantial abnormal returns in nearby investments. These returns are particularly strong among funds that are small and old, focus on few holdings, and operate out of remote areas. Furthermore, we find that while the average fund exhibits only a modest bias toward local stocks, certain funds strongly bias their holdings locally and exhibit even greater local performance. Finally, we demonstrate that the extent to which a firm is held by nearby investors is positively related to its future expected return. Our results suggest that investors trade local securities at an informational advantage and point toward a link between such trading and asset prices.