Home away from home: Geography of Information and local investors, Working paper, University of Miami, available at http://ssrn.com/abstract=1711653

We develop a 10-K-based multidimensional measure of firm locations. Using this measure, we show that firm-level information is geographically distributed and institutional investors are able to exploit the resulting information asymmetry. Specifically, institutional investors overweigh firms whose 10-K frequently mentions the investors’state even when those firms are not headquartered locally and earn superior returns on those stocks. These ownership and performance patterns are stronger among hard-to-value firms. Local investor performance increases with the degree of local bias and with the local economic exposure of portfolio firms. Overall, geographical variation in firm-level information generates economically significant location-based information asymmetry. (JEL G11, G12, G23) The typical U.S. public firm has economic interests in five states beyond its corporate headquarters location. A firm’s headquarters may be in one state, while its plants and operations are located in other states, often far away from the headquarters. Similarly, customers and suppliers, R&D facilities, and other firm activities need not be concentrated around the corporate headquarters.1 When the economic interests of a firm are geographicall