How Distance, Language, and Culture Influence Stockholdings and Trades


  • Mark Grinblatt,

  • Matti Keloharju

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    • Mark Grinblatt is from the Anderson School at UCLA, and Matti Keloharju is from the Helsinki School of Economics, Finland. We are grateful to the Finnish Cultural Foundation, the Foundation of Economic Education, the UCLA Academic Senate, and the Yrjö Jahnsson Foundation for financial support and to the editor, René Stulz, two anonymous referees, Shlomo Bernartzi, Kenneth French, Chris Gadarowski, Michael Long, Tim Loughran, Rena Repetti, Emilio Venezian, Tuomo Vuolteenaho, and seminar participants at Chicago, MIT, Northwestern, Notre Dame, Rutgers, and Yale for comments on an earlier draft. We wish to thank Antti Lehtinen and Jorma Pietala for the distance data, and Kari Toiviainen for suggesting the use of annual reports as indicators of language. We are especially indebted to Henri Bergström, Mirja Lamminpää, Tapio Tolvanen, and Lauri Tommila of the Finnish Central Securities Depositary for providing us with access to the investor data. Some of this research was undertaken while Grinblatt was at Yale's International Center for Finance, for whose support we are grateful.


This paper documents that investors are more likely to hold, buy, and sell the stocks of Finnish firms that are located close to the investor, that communicate in the investor's native tongue, and that have chief executives of the same cultural background. The influence of distance, language, and culture is less prominent among the most investment-savvy institutions than among both households and less savvy institutions. Regression analysis indicates that the marginal effect of distance is less for firms that are more nationally known, for distances that exceed 100 kilometers, and for investors with more diversified portfolios.