Game Hoarding in Europe: Stock-Price Consequences of Local Bias?

37 Pages Posted: 22 Oct 2010 Last revised: 1 Jun 2012

See all articles by Tom Aabo

Tom Aabo

Aarhus University

Christos Pantzalis

University of South Florida

Maja Stoholm Sørensen

Novo Nordisk

Date Written: May 26, 2010

Abstract

Hong, Kubik and Stein (JFE 2008) find that the price of a stock in the US is decreasing in the ratio of the aggregate book value of listed firms in a region to the aggregate personal income in the same region (“RATIO”), an “only-game-in-town” effect. We first replicate the HKS (2008) study using European data and find an opposite effect, a “game-hoarding” effect. We then investigate the underlying factors of RATIO and find that after controlling for differences in origin of law, investor rights, corruption and Euro adoption, neither a game-hoarding effect nor an only-game-in-town effect is strongly supported in the European case. The results are important in understanding the concept of local bias in a cross-country framework.

Keywords: Local bias, Only-game-in-town effect, Game-hoarding effect, Europe

JEL Classification: G11, G12

Suggested Citation

Aabo, Tom and Pantzalis, Christos and Stoholm Sørensen, Maja, Game Hoarding in Europe: Stock-Price Consequences of Local Bias? (May 26, 2010). Paris December 2010 Finance Meeting EUROFIDAI - AFFI, Available at SSRN: https://ssrn.com/abstract=1695383 or http://dx.doi.org/10.2139/ssrn.1695383

Tom Aabo (Contact Author)

Aarhus University ( email )

Fuglesangs Alle 4
DK-8210 Aarhus
Denmark
+45 87 16 48 39 (Phone)
+45 86 15 01 88 (Fax)

Christos Pantzalis

University of South Florida ( email )

Tampa, FL 33620-5500
United States
(813) 974-3262 (Phone)

Maja Stoholm Sørensen

Novo Nordisk ( email )

Novo Allé
Bagsværd, 2880
Denmark