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Retail investors pay over twice as much attention to local companies than non-local ones, based on Google searches. News volume and volatility amplify this attention gap. Attention appears causally related to perceived proximity: first, acquisition by a nonlocal company is associated with less attention by locals, and more by nonlocals close to the acquirer; second, COVID-19 travel restrictions correlate with a drop in relative attention to nonlocal companies, especially in locations with fewer fights after the outbreak. Finally, local attention predicts volatility, bid-ask spreads and nonlocal attention, not viceversa. These findings are consistent with local investors having an information-processing advantage.
A natural experiment in which customer-owned mutual companies converted to publicly listed firms created a plausibly exogenous shock to the stock market participation status of tens of thousands of people. We find the shock changed the way people vote in the affected areas, with a 10% increase in share-ownership rate being followed by a 1.3%–3.1% increase in right-of-center vote share. The institutional details and additional tests suggest that wealth, liquidity, and tax-related incentives cannot fully explain the results. A plausible explanation is that the associated increase in the salience of stock ownership causes a shift in voters’ attention.