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SUMMARY:The Geography of Beliefs - Johan Walden (Haas School of Business U
 niversity of California at Berkeley)
DTSTART:20191114T130000Z
DTEND:20191114T140000Z
UID:TALK131239@talks.cam.ac.uk
CONTACT:CERF/CF Admin
DESCRIPTION:The Geography of Beliefs\n\nAuthors: Harjoat Bhamra (Imperial 
 College Business School)\, Raman Uppal (Edhec Business School)\, and Johan
  Walden (University of Lausanne\, and UC Berkeley)\n\nAbstract:\n \nEmpiri
 cal evidence shows that beliefs of households deviate from rational expect
 ations and instead may be influenced by characteristics such as place of r
 esidence\, culture\, and socioeconomic status\, which can be modeled using
  network theory. We develop a model where a household's beliefs about stoc
 k returns are an \\emph{endogenous} outcome of its location in a bipartite
  network of households and firms. We use this model to establish the relat
 ion between households' beliefs about stock returns\, which are unobservab
 le\, and the portfolio weights allocated to these stocks by these househol
 ds.  We use Finnish data for 126 stocks and the portfolio holdings of 885\
 ,868 households to estimate our model and find that distance in the networ
 k has a statistically and economically significant effect on the beliefs o
 f households. Our estimates show that agents are connected to firms within
  a radius of about 145 miles from where they live\, and geography has a st
 rong effect on beliefs: a one standard deviation decrease in an agent's di
 stance to a firm's headquarters predicts an increase in portfolio holdings
  by 165%. Our work provides microfoundations for the bias toward local sto
 cks documented empirically. \n\n
LOCATION:KH107\, Cambridge Judge Business School
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