Publication Type
Journal Article
Version
submittedVersion
Publication Date
10-2019
Abstract
This paper examines the effect of social trust on local bias. Our evidence suggests that institutional investors located in high-trust regions of the United States exhibit lower local bias. Moreover, we find that high-trust investors are better diversified, suggesting that trust helps accomplish greater diversification. The results are not due to firm, demographic, or local economic characteristics. Additional analysis reveals that the documented informational advantage in local holdings exists only in low-trust regions. We show that this finding is consistent with a trust explanation.
Keywords
Trust, Local Bias, Institutional Investors, Cultural Economics
Discipline
Finance and Financial Management | Portfolio and Security Analysis
Research Areas
Finance
Publication
Journal of Financial and Quantitative Analysis
First Page
1
Last Page
62
ISSN
0022-1090
Identifier
10.1017/S0022109019000942
Publisher
Cambridge University Press (CUP): HSS Journals
Citation
WEI, Chi Shen and ZHANG, Lei.
Trust and local bias. (2019). Journal of Financial and Quantitative Analysis. 1-62.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/6529
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1017/S0022109019000942