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Neighbors matter: Geographical distance and trade timing in the stock market

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Listed:
  • Baltakys, Kȩstutis
  • Baltakienė, Margarita
  • Kärkkäinen, Hannu
  • Kanniainen, Juho

Abstract

The starting point of this paper is that neighboring investors may talk to each other sharing information about their transactions in stock markets, leading to similar trading behavior. We find that pairwise trade timing similarities between investor pairs are negatively associated to geographical distance between corresponding investor pairs. This suggests that local information transfer channels between neighboring individual investors are used in decision making. We also observe that differences in age and language moderate this association. The analysis is conducted using investor level data from different regions of Finland.

Suggested Citation

  • Baltakys, Kȩstutis & Baltakienė, Margarita & Kärkkäinen, Hannu & Kanniainen, Juho, 2019. "Neighbors matter: Geographical distance and trade timing in the stock market," Finance Research Letters, Elsevier, vol. 31(C).
    • Handle: RePEc:eee:finlet:v:31:y:2019:i:c:s1544612318304367
    DOI: 10.1016/j.frl.2018.11.013
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    References listed on IDEAS

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    4. Tiniç, Murat & Tanyeri, Başak & Bodur, Mehmet, 2021. "Who to trust? Reactions to analyst recommendations of domestic versus foreign brokerage houses in a developing stock market," Finance Research Letters, Elsevier, vol. 43(C).
    5. Yang, Ann Shawing, 2023. "Regret sensitivity and stock certificate loss reporting: Evidence from Taiwan," Finance Research Letters, Elsevier, vol. 58(PA).

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    More about this item

    Keywords

    Investor trading; Geographical distance; Information transfer; Private information; Investor network; Social interactions; Behavioral finance; Behavioral economics; Social networks; Individual investors;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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