DP16747 The Geography of Investor Attention

Author(s): Stefano Mengoli, Marco Pagano, Pierpaolo Pattitoni
Publication Date: November 2021
Keyword(s): attention, distance, liquidity, local investors, News, Retail investors, volatility
JEL(s): D83, G11, G12, G14, G50, L86, R32
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16747

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.