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Trading concentration and industry-specific information: an analysis of auto complaints

Author

Listed:
  • Marshall A. Geiger

    (University of Richmond)

  • Sami Keskek

    (Florida State University)

  • Abdullah Kumas

    (University of Richmond)

Abstract

We investigate whether sophisticated investors’ trading concentration in the auto industry is associated with their use of auto complaint data. We find that the extent to which mutual funds concentrate their trading in the auto industry is positively associated with their incorporation of the complaint information into their trading decisions both before and after auto recall announcements. We provide evidence that trading concentration by mutual funds is more consistent with the information advantage explanation rather than behavioral explanations for concentration such as overconfidence or familiarity. However, we find that pension funds, regardless of their level of trading concentration, do not use the customer complaint information to inform their trading decisions. Our findings suggest that pension funds concentrate trading for reasons other than short-term information advantage, suggesting that the underlying reason for trading concentration can differ by the type of institutional investor.

Suggested Citation

  • Marshall A. Geiger & Sami Keskek & Abdullah Kumas, 2022. "Trading concentration and industry-specific information: an analysis of auto complaints," Review of Quantitative Finance and Accounting, Springer, vol. 59(3), pages 913-937, October.
    • Handle: RePEc:kap:rqfnac:v:59:y:2022:i:3:d:10.1007_s11156-022-01063-x
    DOI: 10.1007/s11156-022-01063-x
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    More about this item

    Keywords

    Industry trading concentration; Institutional investors; Customer complaints; Product recall; Auto industry; Market efficiency;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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