Discussion paper

DP16747 The Geography of Investor Attention

Local companies attract significantly more attention from investors than nonlocal companies, especially at times of news releases and high volatility. This attention gap widens especially when news is firm-specific rather than aggregate, and in response to idiosyncratic rather than market risk. Attention is causally related to perceived proximity: after a firm is acquired by a nonlocal one, local investors re-allocate attention away from it more than nonlocal investors; conversely, COVID-19 travel restrictions led investors to reallocate attention towards local companies and away from nonlocal ones, especially those harder to reach. Finally, local attention predicts volatility, bid-ask spreads, and nonlocal attention, but not vice versa. Our findings suggest that the geography of attention matters and is shaped by local investors' information-processing advantage, not familiarity bias.


Mengoli, S, M Pagano and P Pattitoni (2021), ‘DP16747 The Geography of Investor Attention‘, CEPR Discussion Paper No. 16747. CEPR Press, Paris & London. https://cepr.org/publications/dp16747