Title: Local information concentration and stock price informativeness

Authors: Michael Hyman; Scott Duellman

Addresses: Merrimack College, 315 Turnpike St., North Andover, MA 01845, USA ' Saint Louis University, 3674 Lindell Blvd, St. Louis, MO 63108, USA

Abstract: Investors have been shown to gather local information, which allows for superior investment returns. We document that when the local information landscape is less dispersed and local information is concentrated on fewer firms, stock prices better align with future earnings. These findings are clustered in small firms, firms in rural communities, and firms with low institutional ownership, suggesting that local information's ability to be priced into earnings is strongest in regions where information is otherwise unavailable. Overall, we show that the ability of local information to be utilised is dependent both on the amount of local information available to investors and the resources available to investors to capitalise on the information.

Keywords: local information; institutional ownership; information asymmetry; prices to earnings.

DOI: 10.1504/AJFA.2021.117213

American Journal of Finance and Accounting, 2021 Vol.6 No.3/4, pp.201 - 222

Received: 15 Feb 2021
Accepted: 27 Apr 2021
Published online: 23 Aug 2021 *