We show that the introduction of a new asset affects the prices of previously existing assets in a market. Using data from 254 IPOs in emerging markets, we find that stocks in industries that covary highly with the industry of the IPO experience a larger decline in prices relative to other stocks during the month of the IPO. The effects are stronger when the IPO is issued in a market that is less integrated internationally, and when the IPO is big. The evidence supports the idea that the composition of asset supply affects the cross‐section of stock prices.

effect of product market choices on investment decisions *

We show that the introduction of a new asset affects the prices of previously existing assets in a market. Using data from 254 IPOs in 22 emerging markets, we find that stocks in industries that covary highly with the industry of the IPO experience a larger decline in prices relative to other stocks during the month of the IPO. The effects are stronger when the IPO is issued in a market that is less integrated internationally, and when the IPO is big. The evidence supports the idea that the composition of asset supply affects the cross-section of stock prices.

Stocks appear to have investor clienteles based on their business practices and products. The variety in expressive benefits each individual receives from owning controversial stocks causes them to modify their portfolio to accommodate their beliefs. We examine the ownership of firms with social concerns and sin stocks (tobacco, alcohol and gambling). Women tilt their portfolios towards stocks with progressive labor policies for women and minorities. Younger investors avoid companies with poor environmental records but seek companies with progressive labor policies. Democratic voters favor stocks with progressive policies regarding women/minorities and gays/lesbians and are less likely to own sin stocks. Christian objections to homosexuality lead their members to invest less in stocks with progressive labor policies for gays and lesbians. The Christian denominations vary, though, in regard to sin stocks. Catholics are more likely while Mormons are less likely to own a sin stock relative to other investors. Socially responsible investors are clearly not all alike. Social characteristics that are important to one investor may not be important to another socially conscious investor.

and seminar participants at the University of Miami for helpful discussions and valuable comments. We thank Yaniv Grinstein for the option backdating data and Frank Yu for the earnings management data. We are responsible for all remaining errors and omissions. Distance Matters! Shareholder Proximity and Corporate Policies Abstract – This paper investigates whether proximity to institutional shareholders influences corporate policies. We find that firms with high local institutional ownership are more profitable, less risky, and have a better governance structure. Specifically, these firms are less likely to engage in undesirable corporate activities such as aggressive earnings management or option back-dating and are therefore less likely to be a target of class action lawsuits. Further, firms with more local institutional shareholders are less likely to be a takeover target. We also find that both total and option-based executive compensation levels are lower for firms with more local institutional shareholders. In contrast, high local retail ownership does not have significant influence on corporate policies. Taken together, these results are consistent with our conjecture that local institutions serve as more effective monitors of corporate behavior because monitoring costs vary inversely with distance. 1.

Household stock and real estate investments are known to be locally biased. We estab-lish that households residing in a Metropolitan Statistical Area (MSA) with few pub-licly traded firms headquartered there are more likely to purchase investment homes nearby and less likely to own stocks. However, MSAs with few firms might simply have more unsophisticated investors, who are familiar with homes as opposed to stocks. In-deed, households living in low FICO (subprime) zip codes, controlling for wealth and income, are more likely to invest in homes than stocks than households living in high FICO zip codes in the same MSA. But, this difference is smaller for MSAs with few firms, consistent with our only-game-in-town effect. Our effect explains the recent boom and bust cycles for large MSAs like Phoenix and Las Vegas, which had been previously difficult to rationalize using housing supply elasticity alone.

This study finds robust evidence that banks headquartered in more religious areas take less risk and remain less vulnerable to financial crises. To reduce risk, these banks grow their assets more slowly, hold safer assets, rely less on non-traditional banking, and provide less incentives to their executives to increase risks. Local religiosity has a more pronounced influence on risks among banks for which local investors and managers are more important. But these banks command lower market valuations during normal times. Overall, this paper provides the first empirical evidence of the importance of human behavior in bank risk-taking.

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of Business at USC. Comments from seminar and conference participants, as well as the the

Abstract – Using a large dataset of institutional trades, we examine whether superior intraquarter trading performance of institutional investors reflects superior trading skill or opportunistic access to information. Our conjecture is that true investment skill would not depend upon geographical proximity between investors and firms, while opportunistic access to information is likely to be location-dependent. Thus, if institutions are truly skilled, they would earn high average return and exhibit performance persistence in both their local and nonlocal trades. Our evidence indicates that institutions on average are not skilled and their superior intraquarter performance is more likely to reflect opportunistic access to short-term local information. They have high average local performance but this performance is not persistent. Further, we observe increased local trading