TY - JOUR
T1 - Information immobility, industry concentration, and institutional investors' performance
AU - Fedenia, Mark
AU - Shafer, Sherrill
AU - Skiba, Hilla
PY - 2013/6
Y1 - 2013/6
N2 - This paper examines foreign institutional investors' portfolio allocation and performance in US securities. We test how information immobility, proxied by information barriers between the investors' home markets and the US, influences portfolio strategies. Consistent with theoretical predictions, foreign institutional investors' total investment in the US is negatively related to information immobility. Similarly, information immobility is a significant driver of portfolio under-diversification across industries. Industry concentration has declined over time, consistent with declining search costs. Industry-concentrated portfolios outperform more diversified portfolios for both foreign and US institutional investors. Concentration especially helps institutional investors with the easiest access to information.
AB - This paper examines foreign institutional investors' portfolio allocation and performance in US securities. We test how information immobility, proxied by information barriers between the investors' home markets and the US, influences portfolio strategies. Consistent with theoretical predictions, foreign institutional investors' total investment in the US is negatively related to information immobility. Similarly, information immobility is a significant driver of portfolio under-diversification across industries. Industry concentration has declined over time, consistent with declining search costs. Industry-concentrated portfolios outperform more diversified portfolios for both foreign and US institutional investors. Concentration especially helps institutional investors with the easiest access to information.
KW - Culture
KW - Home bias
KW - Industry concentration
KW - International diversification
KW - Portfolio performance
UR - http://www.scopus.com/inward/record.url?scp=84875862599&partnerID=8YFLogxK
U2 - 10.1016/j.jbankfin.2013.01.034
DO - 10.1016/j.jbankfin.2013.01.034
M3 - Article
SN - 0378-4266
VL - 37
SP - 2140
EP - 2159
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
IS - 6
ER -