TAXI! Do Mutual Funds Pursue and Exploit Information on Local Companies?

We use New York City (NYC) taxi data to identify trips between mutual fund offices and local firm headquarters. NYC funds overweight the stocks of local firms they visit via taxi, and firm visits are associated with superior investment performance. Firm visits are elevated prior to earnings announce...

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Bibliographic Details
Published in:Journal of financial and quantitative analysis 2024-11, Vol.59 (7), p.3340-3375
Main Authors: Cicero, David C., Puckett, Andy, Wang, Albert Y., Zhang, Shen
Format: Article
Language:English
Subjects:
Abnormal returns
Earnings
Head offices
Institutional investments
Investment advisors
Investors
Mutual funds
Obesity
Public companies
Regulation
Stock prices
Taxicabs
Visits
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Summary:We use New York City (NYC) taxi data to identify trips between mutual fund offices and local firm headquarters. NYC funds overweight the stocks of local firms they visit via taxi, and firm visits are associated with superior investment performance. Firm visits are elevated prior to earnings announcements, and mutual fund trades that are associated with firm taxi visits predict earnings surprises. The results are generally stronger when fund and firm executives share educational connections. Additional tests support the conclusion that funds’ local bias and investment performance are driven by portfolio managers’ efforts and ability to actively gather material information.
ISSN:0022-1090
1756-6916
DOI:10.1017/S0022109023000868