Proximity Always Matters: Evidence from Swedish Data

Abstract

In this paper I investigate the formation of local bias when the set of local companies changes: I analyze portfolios of individual investors that changed their place of residence. I find that the further away investors move from the company's closest establishment, the more of its stock they abnormally sell relative to the investors that do not move. I also document 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 stocks acquired after the move and originally held stocks, which holdings increased after the move. Confirming the results of other studies I find that Swedish individual investors derive economically and statistically significant gains from investing locally.