Abstract
We investigate how the local information demand explains the market outcomes in cross-listed European Exchange Traded Funds (ETFs). Our results show that the local information demand predicts the future trading volume and, to a lesser extent, the future net fund flows. The effects of the information demand are much stronger when the institutional ownership of the traded ETF is low. Our evidence implies that retail investors, unlike institutional investors, trade and process information regarding securities locally regardless of the domicile of the underlying investment. Our findings hence lend support to the perceived role of familiarity bias, although its prominence and impact vary between countries.
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