DP7428 Do Individual Investors Have Asymmetric Information Based On Work Experience?

Author(s): Trond Døskeland, Hans K Hvide
Publication Date: August 2009
Keyword(s): asymmetric information, behavioural finance, familiarity, household finance
JEL(s): D83, G11, J24
Programme Areas: Labour Economics, Financial Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=7428

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.