Matti Keloharju's paper accepted in The Review of Financial Studies

04.06.2012

Article “Do investors buy what they know? Product market choices and investment decisions,” by Matti Keloharju, Samuli Knüpfer (London Business School), and Juhani Linnainmaa (Chicago Booth) has been accepted for publication in The Review of Financial Studies.

Abstract
This paper shows individuals' product market choices influence their investment decisions. Using microdata from the brokerage and automotive industries, we find a strong positive relation between customer relationship, ownership of a company, and size of the ownership stake. Investors also are more likely to purchase and less likely to sell shares of companies they frequent as customers. These effects are stronger for individuals with longer customer relationships. A merger-based natural experiment supports a causal interpretation of our results. We find weaker causality in the other direction: inheritances and gifts of stocks have only a modest effect on individuals' patronage decisions. A setup in which customer-investors regard stocks as consumption goods, not just as investments, seems to best explain our results.

Information:
Download the article here.

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