9. Local News and Active Trading

This chapter presents select preliminary findings from a recent study conducted by Mavruk (2016) on what role local media plays—if any—in the trading activity and equity returns in local markets. His study examines the sources of local information and tests its direct effects on the local investments made by individual investors. The focus is mainly on if and how news in local media affects the trading activity and portfolio returns of individual investors who exhibit proximity (locally and/or birthplace) bias. The results contribute to the local bias literature by allowing us to infer information asymmetry between proximate individual investors and other remote investors and also separate informed local trades from uninformed local trades. By paying more attention to the local webpage news, remote individual investors may reduce their information search costs, and hence information asymmetry between them and local investors.