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Is There Information in the Local Portfolio Choices of Individuals? Mark S. Seasholes Ning Zhu U.C. Berkeley U.C. Davis This Version September 12, 2005∗ Abstract We use calendar-time portfolios and transaction-level data to test if individual investors have any value-relevant information. Individual investors are poor at picking stocks. Stocks bought over the past twelve months under-perform stocks sold by 2.18% per annum (1.38% on a risk- adjusted basis). We divide each individual’s portfolio into local and remote stocks. Portfolios of local stocks do not significantly outperform portfolios of remote stocks. At times, local portfolios actually under-perform remote portfolios. Our results are robust to one-, three-, and five-year holding periods; equal- and value-weighted portfolio formation methods; and the consideration of non SP 500 stocks. There is simply no evidence that individuals have information about the local stocks in their portfolios. Our results differ from previous studies of individual investor geography because we correctly account for the fact that stock returns are contemporaneously correlated. Keywords: Home Bias, Informed Trading, Familiarity JEL number: G15, F3, D1 ∗We thank a large discount broker, Brad Barber, and Terry Odean for providing the data used in this study. Terry Hendershott, Chris Hennessy, Tobias Moskowitz, and Terry Odean provided many helpful comments. We are especially grateful to Brad Barber who has been instrumental in the development of this paper. Contact information: Mark S. Seasholes, UC Ber