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Correlated Trading and Location
Author(s) -
FENG LEI,
SEASHOLES MARK S.
Publication year - 2004
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2004.00694.x
Subject(s) - china , business , identification (biology) , stock (firearms) , financial economics , public information , stock market , institutional investor , finance , economics , geography , corporate governance , computer science , context (archaeology) , botany , archaeology , biology , internet privacy
This paper analyzes the trading behavior of stock market investors. Purchases and sales are highly correlated when we divide investors geographically. Investors who live near a firm's headquarters react in a similar manner to releases of public information. We are able to make this identification by exploiting a unique feature of individual brokerage accounts in the People's Republic of China. The data allow us to pinpoint an investor's location at the time he or she places a trade. Our results are consistent with a simple, rational expectations model of heterogeneously informed investors.