Do Investors Buy What They Know? Product Market Choices and Investment Decisions

Keloharju, Matti; Knüpfer, Samuli; Linnainmaa, Juhani T.

doi:10.2139/ssrn.1670013

Cited by 38 publications

(54 citation statements)

References 41 publications

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“…Investors are biased towards advertised, visible, and brand name stocks (Frieder and Subrahmanyam, 2005), issued by firms they frequent as customers (Huberman, 2001;Keloharju et al, 2012), and within their two-digit industry of employment (Døskeland and Hvide, 2011). In brief, investors buy what they feel is familiar.…”

Section: Family Firms and The Lhb: Testable Hypothesesmentioning

confidence: 99%

Family firm local involvement and the Local Home Bias phenomenon

Baschieri¹,

Carosi²,

Mengoli³

2017

Long Range Planning

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Research has documented that most of retail and institutional investors exhibit a strong preference for stocks issued by nearby listed firms (i.e. Local Home Bias). This phenomenon shapes corporate market value and the cost of funding. In this paper, we investigate whether the Local Home Bias is enhanced in family firms as a consequence of their symbiotic connection with the local community. Using a dataset of 2,951 Italian firm-year observations (1,481 are family firms) over the period 1999e2011, we find that Local Home Bias is not a widespread phenomenon and mainly occurs in founding family firms where the founder serves as CEO. The Local Home Bias is absent in non-family firms or in family firms where the owner has acquired control through a market transaction. Overall, results suggest that locally committed family firms trigger investor preference for local stocks and, in doing so, exploit the dedicated local clientele which shrinks the cost of funding. Ultimately, we argue the social contributions of family firms to the local community could even have opportunistic traits and a non-trivial economic effect

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Section: Family Firms and The Lhb: Testable Hypothesesmentioning

confidence: 99%

Family firm local involvement and the Local Home Bias phenomenon

Baschieri¹,

Carosi²,

Mengoli³

2017

Long Range Planning

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“…We investigate whether advertising is one such activity. Advertising is a firm‐controlled activity that targets consumers, but has the potential to simultaneously attract investors' attention (Keloharju, Knüpfer, and Linnainmaa [], Lou []). In the presence of attention constraints (Kahneman and Tversky []), advertisements plausibly remind current and potential investors about the company and can result in increased search for financial information.…”

Section: Introductionmentioning

confidence: 99%

Is Investor Attention for Sale? The Role of Advertising in Financial Markets

Madsen

Niessner

2019

J of Accounting Research

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Prior research documents capital market benefits of increased investor attention to accounting disclosures and media coverage; however, little is known about how investors and markets respond to attention-grabbing events that reveal little nonpublic information. We use daily firm advertising data to test how advertisements, which are designed to attract consumers' attention, influence investors' attention and financial markets (i.e., spillover effects). Exploiting the fact that firms often advertise at weekly intervals, we use an 764 J. MADSEN AND M. NIESSNER instrumental variables approach to provide evidence that print ads, especially in business publications, trigger temporary spikes in investor attention. We further find that trading volume and quoted dollar depths increase on days with ads in a business publication. We contribute to research on how management choices influence firms' information environments, determinants and consequences of investor attention, and consequences of advertising for financial markets. JEL codes: G14; G41; M37; M41

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“…Our article relates to three strands of literature. First, our article is related to the stock market participation literature (e.g., Hong, Kubik, and Stein 2004;Georgarakos and Pasini 2011;Guiso, Sapienza, and Zingales 2008;Brown et al 2008;Grinblatt, Keloharju, and Linnainmaa 2011;Guiso, Haliassos, and Jappelli 2003;Giannetti and Koskinen 2010), and, more in particular, to that strand of this literature consistent with investors that regard stocks as consumption goods rather than as investments (e.g., Keloharju, Knüpfer, and Linnainmaa 2012;Cao et al 2011;Cohen 2009;Fama and French 2007;Grullon, Kanatas, and Weston 2004;Frieder and Subrahmanyam 2005;Lou 2014).…”

Section: Introductionmentioning

confidence: 99%

Initial Public Offerings and the Firm Location

2017

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This Working Paper is published under the auspices of the Department of Management at Università Ca' Foscari Venezia. Opinions expressed herein are those of the authors and not those of the Department or the University. The Working Paper series is designed to divulge preliminary or incomplete work, circulated to favour discussion and comments. Citation of this paper should consider its provisional nature.

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Do Investors Buy What They Know? Product Market Choices and Investment Decisions

Cited by 38 publications

References 41 publications

Family firm local involvement and the Local Home Bias phenomenon

Family firm local involvement and the Local Home Bias phenomenon

Is Investor Attention for Sale? The Role of Advertising in Financial Markets

Initial Public Offerings and the Firm Location

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