Proximity always matters:
evidence from Swedish data
Andriy Bodnaruk†
Department of Finance
Stockholm School of Economics
Abstract: This paper investigates different hypotheses of local bias existence. I
find that the relative change in investor’s holdings of originally held stocks is
negatively related to the distance investor moves away from company’s closest
establishment. The effect is driven by multiple stockholders. I also find that
originally held stocks, which holdings have not increased after the move, are
more distant and provide lower return to the investors in their new location than
newly purchased stocks and originally held stocks, which holdings increased after
the move. These findings provide support for “informed investors“ and “local
competition” hypotheses. Confirming the results of other studies I also find that
Swedish individual investors derive economically and statistically significant
gains from investing locally. The results are robust to different set of controls.
†
Andriy Bodnaruk is a PhD student at the Department of Finance, Stockholm School of Economics. Corresponding
address: BOX 6501, 11383 Stockholm, Sweden. E-mail: Andriy.Bodnaruk@hhs.se