The Only Game in Town: Stock-Price Consequences of Local Bias
| Title: | The Only Game in Town: Stock-Price Consequences of Local Bias |
| Author: |
Stein, Jeremy; Kubik, Jeffrey D.; Hong, Harrison
Note: Order does not necessarily reflect citation order of authors. |
| Citation: | Hong, Harrison, Jeffrey D. Kubik, and Jeremy C. Stein. 2008. The only game in town: Stock-price consequences of local bias. Journal of Financial Economics 90(1): 20-37. |
| Full Text & Related Files: |
Stein OnlyGameInTown.pdf (194.9Kb; PDF) 
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| Abstract: | Theory suggests that, in the presence of local bias, the price of a stock should be decreasing in the ratio of the aggregate book value of firms in its region to the aggregate risk tolerance of investors in its region. Using data on U.S. states and Census regions, we find clear-cut support for this proposition. Most of the variation in the ratio of interest comes from differences across regions in aggregate book value per capita. Regions with low population density—e.g., the Deep South—are home to relatively few firms per capita, which leads to higher stock prices via an "only-game-in-town" effect. |
| Published Version: | http://dx.doi.org/10.1016/j.jfineco.2007.11.006 |
| Other Sources: |
http://www.princeton.edu/~hhong/onlygameintown-nov-07.pdf
http://www.nber.org/papers/w11488.pdf |
| Terms of Use: | This article is made available under the terms and conditions applicable to Open Access Policy Articles, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#OAP |
| Citable link to this page: | http://nrs.harvard.edu/urn-3:HUL.InstRepos:3710665 |
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