Trust and Local Bias

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journal

View graph of relations

Author(s)

Related Research Unit(s)

Detail(s)

Original languageEnglish
Pages (from-to)2211-2245
Journal / PublicationJournal of Financial and Quantitative Analysis
Volume55
Issue number7
Online published29 Oct 2019
Publication statusPublished - Nov 2020

Abstract

In this article, we examine 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.

Citation Format(s)

Trust and Local Bias. / Wei, Chishen; Zhang, Lei.

In: Journal of Financial and Quantitative Analysis, Vol. 55, No. 7, 11.2020, p. 2211-2245.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journal