The Geography of Information Acquisition

63 Pages Posted: 24 Apr 2019 Last revised: 20 Mar 2021

See all articles by Honghui Chen

Honghui Chen

Department of Finance, University of Central Florida

Yuanyu Qu

University of International Business and Economics (UIBE) - School of Banking and Finance

Tao Shen

Tsinghua University

Qinghai Wang

University of Central Florida - College of Business Administration

Date Written: November 12, 2019

Abstract

Using detailed data about company visits by Chinese mutual funds, we provide direct evidence of mutual fund information acquisition activities and the consequent informational advantages mutual funds establish in local firms. Mutual funds are more likely to visit local and nearby firms, though ease of travel between fund and firm locations alleviates geographic distance constraints. Company visits by mutual funds are related to both fund trading activities and fund trading performance. The relation between company visits and fund trading performance is particularly strong in newly initiated stock positions. Consistent with this result, we find evidence of intensive information acquisition by mutual funds in stocks not in their current portfolios. Our results suggest that mutual fund local preference in portfolio choice is at least partially driven by geographic constraints of information acquisition and the ensuing information asymmetry.

Keywords: mutual funds, information acquisition, local bias, portfolio choice

JEL Classification: G11, G23

Suggested Citation

Chen, Honghui and Qu, Yuanyu and Shen, Tao and Wang, Qinghai, The Geography of Information Acquisition (November 12, 2019). Available at SSRN: https://ssrn.com/abstract=3371978 or http://dx.doi.org/10.2139/ssrn.3371978

Honghui Chen

Department of Finance, University of Central Florida ( email )

PO Box 161400
Orlando, FL 32816
United States
407-823-0895 (Phone)

Yuanyu Qu

University of International Business and Economics (UIBE) - School of Banking and Finance ( email )

No.10, Huixindong Street
Chaoyang District
Beijing, 100029
China

Tao Shen (Contact Author)

Tsinghua University ( email )

Department of Finance
School of Economics and Management
China

Qinghai Wang

University of Central Florida - College of Business Administration ( email )

PO Box 161400
Orlando, FL 32816
United States

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