TY  - JOUR
AU  - Goetzmann,William N.
AU  - Massa,Massimo
AU  - Simonov,Andrei
TI  - Portfolio Diversification and City Agglomeration
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10343
PY  - 2004
Y2  - March 2004
UR  - http://www.nber.org/papers/w10343
L1  - http://www.nber.org/papers/w10343.pdf
N1  - Author contact info:
William N. Goetzmann
School of Management
Yale University
Box 208200
New Haven, CT 06520-8200
Tel: 203/432-5950
Fax: 203/432-3003
E-Mail: william.goetzmann@yale.edu

Massimo Massa
INSEAD
Department of Finance
Blve de Constance
77305 Fontainebleau  FRANCE
E-Mail: massimo.massa@insead.edu

Andrei Simonov
321 Eppley, Department of Finance
Eli Broad Graduate School of Management
Michigan State University
East Lansing, MI 48824, USA
Fax: 517-432-1080
E-Mail: simonov@msu.edu
AB  - 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 motives to explain the lack of portfolio diversification, and some evidence in favor of perceived informational advantage in an urban setting. We attribute this evidence as support for the broader 'knowledge spillover' processes documented in the recent urban economics literature. Portfolio effects may be added to the list of factors that define and differentiate urbanism.
ER  -