Working Paper: CEPR ID: DP7428
Authors: Trond Dskeland; Hans K. Hvide
Abstract: Using a novel and unique dataset from Norway, we analyze whether professional proximity is associated with asymmetric information and abnormal returns. We find that individuals hold an excess weight in stocks that are professionally close. For example, after excluding holdings of own-company and previous employer stock, investors on average hold 11% of their portfolio in stocks within their two-digit industry of employment. We find no evidence that investments in professionally close stocks are associated with a positive abnormal return in either the short or the long term. In some specifications, we find evidence of a negative abnormal return. We conclude there is no evidence of professional proximity being associated with asymmetric information and abnormal returns.
Keywords: asymmetric information; behavioral finance; familiarity; household finance
JEL Codes: D83; G11; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| professional proximity (L84) | asymmetric information (D82) |
| professional proximity (L84) | abnormal returns (G14) |
| expertise stocks (G12) | abnormal returns (G14) |
| expertise bias (D91) | local bias (J15) |
| individual investors (G24) | expertise stocks (G12) |