Discussion Paper Details

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Title: The Geography of Investor Attention

Author(s): Stefano Mengoli, Marco Pagano and Pierpaolo Pattitoni

Publication Date: November 2021

Keyword(s): attention, distance, liquidity, local investors, News, Retail investors and volatility

Programme Area(s): Financial Economics

Abstract: Retail investors pay over twice as much attention to local companies than non-local ones, based on Google searches. News volume and volatility amplify this attention gap. Attention appears causally related to perceived proximity: first, acquisition by a nonlocal company is associated with less attention by locals, and more by nonlocals close to the acquirer; second, COVID-19 travel restrictions correlate with a drop in relative attention to nonlocal companies, especially in locations with fewer flights after the outbreak. Finally, local attention predicts volatility, bid-ask spreads and nonlocal attention, not viceversa. These findings are consistent with local investors having an information-processing advantage.

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Bibliographic Reference

Mengoli, S, Pagano, M and Pattitoni, P. 2021. 'The Geography of Investor Attention'. London, Centre for Economic Policy Research.