Investor sophistication and asset prices

George M. Korniotis; Alok Kumar; Jeremy K. Page

doi:10.1002/rfe.1093

Investor sophistication and asset prices

George M. Korniotis, Alok Kumar, Jeremy K. Page

Finance

Research output: Contribution to journal › Article › peer-review

1 Scopus citations

Abstract

We show that geographical variation in the level of investor sophistication influences local asset prices. Investors in less sophisticated regions exhibit stronger trading correlations, and correspondingly, the returns of firms headquartered in less sophisticated areas are more strongly correlated. Furthermore, we show that local economic conditions have a greater ability to predict local stock returns in the U.S. states with less sophisticated retail investors. These asset pricing results are driven by the sophistication of actual local investors, and not by the characteristics of the broader local population.

Original language	English (US)
Pages (from-to)	557-579
Number of pages	23
Journal	Review of Financial Economics
Volume	38
Issue number	4
DOIs	https://doi.org/10.1002/rfe.1093
State	Published - Oct 1 2020

Keywords

investor sophistication
local return predictability
return comovement
state portfolios
trading correlation

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1002/rfe.1093

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Investor sophistication and asset prices

Abstract

Keywords

ASJC Scopus subject areas

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