How distance, language, and culture influence stockholdings and trades

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 co mmunicate in the investor's native tongue, and that have chief executives o f the same cultural background. The influence of distance, language, and cu lture is less prominent among the most investment-savvy institutions than a mong both households and less savvy institutions. Regression analysis indic ates that the marginal effect of distance is less for firms that are more n ationally known, for distances that exceed 100 kilometers, and for investor s with more diversified portfolios.