NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Andrei Simonov

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Working Papers

March 2004Portfolio Diversification and City Agglomeration
with William N. Goetzmann, Massimo Massa: w10343
We relate the degree of investor portfolio focus to the broader urban economic context of the household. Using a detailed panel of investors in Sweden over the period 1995 to 2000, we find that the level of investor diversification, as measured by number of stocks in the portfolio and by the average correlation among holdings, is partially explained by city industrial characteristics. We find that rural portfolios are more diversified than urban portfolios and that portfolio diversification is characterized by factors associated with urban growth. We consider a number of theories to explain investor focus, including behavioral biases, real and perceived informational advantage, local social competition and hedging of non-tradable risk. We find little evidence to support social and hedging ...

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