We show that investors acquire more public information about firms to which they are more socially proximate. A standard deviation increase in the Social Connectedness Index (Bailey, Cao, Kuchler, Stroebel, and Wong, 2018) between a firm’s headquarter county and a searcher county is associated with 30% more EDGAR filing downloads from the searcher county. The effect of social proximity on traditional investment research is distinct from the effects of geographic proximity and capital allocation. We find similar results studying headquarter relocations, investor-level data, power outages, and EDGAR downloads from European regions, for which physical distance should be irrelevant. Social proximity matters more during times of high market-wide uncertainty and for firms with weaker information environments. Traditional information gathered by socially proximate investors predicts short-term earnings and stock returns. Collectively, the evidence indicates that social ties mitigate informational frictions and foster valuable traditional information acquisition in financial markets.
| Speaker: | Dr Travis Dyer Associate Professor and PwC Fellow, Brigham Young University |
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