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Game hoarding in Europe: stock-price consequences of local bias?

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  • Tom Aabo
  • Christos Pantzalis
  • Maja Stoholm S?rensen

Abstract

Local bias within a country and between countries is well established in the empirical literature. However, the underlying reasons are less well established. In a simple supply and demand framework, Hong, Kubik, and Stein (hereafter HKS) [2008. The only game in town: Stock-price consequences of local bias. Journal of Financial Economics 90, no. 1: 20--37.] find an ‘only-game-in-town’ effect in the USA -- the stock price in a region decreases in the ratio of aggregate book value of listed firms to the aggregate personal income (‘RATIO’). We first replicate the HKS (2008) study using European data and find an opposite effect, a ‘game-hoarding’ effect. We then investigate the underlying factors of RATIO and find that after controlling for differences in origin of law, investor rights, corruption and Euro adoption, neither a game-hoarding effect nor an only-game-in-town effect is strongly supported in the European case. The results are important in understanding the concept of local bias in a cross-country framework.

Suggested Citation

  • Tom Aabo & Christos Pantzalis & Maja Stoholm S?rensen, 2013. "Game hoarding in Europe: stock-price consequences of local bias?," The European Journal of Finance, Taylor & Francis Journals, vol. 19(4), pages 318-335, April.
    • Handle: RePEc:taf:eurjfi:v:19:y:2013:i:4:p:318-335
    DOI: 10.1080/1351847X.2012.689775
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    Cited by:

    1. Baschieri, Giulia & Carosi, Andrea & Mengoli, Stefano, 2015. "Local IPOs, local delistings, and the firm location premium," Journal of Banking & Finance, Elsevier, vol. 53(C), pages 67-83.
    2. Baschieri, Giulia & Carosi, Andrea & Mengoli, Stefano, 2016. "Does the earnings quality matter? Evidence from a quasi-experimental setting," Finance Research Letters, Elsevier, vol. 19(C), pages 146-157.

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