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Local bias under natural disasters

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  • Haiqiang Chen
  • Yining Chen
  • Dongxu Li

Abstract

Exploiting account‐level daily stock holding records of over 24,000 retail investors, we show that local investors increase holdings of local stocks more than the nonlocals' in the case of natural disasters. Additional tests suggest that the effect is likely driven by the local investors' information advantage about the intrinsic value of local stocks, navigating them to the underpriced ones and thus achieving superior stock returns. Our study reveals the economic reasoning underlying local biases particularly under natural disasters.

Suggested Citation

  • Haiqiang Chen & Yining Chen & Dongxu Li, 2025. "Local bias under natural disasters," International Review of Finance, International Review of Finance Ltd., vol. 25(1), March.
    • Handle: RePEc:bla:irvfin:v:25:y:2025:i:1:n:e70009
    DOI: 10.1111/irfi.70009
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