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Managing Financial RisksFrom Global to Local$
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Gordon L. Clark, Adam D. Dixon, and Ashby H. B. Monk

Print publication date: 2009

Print ISBN-13: 9780199557431

Published to Oxford Scholarship Online: September 2009

DOI: 10.1093/acprof:oso/9780199557431.001.0001

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The Role of Proximity in Secondary Equity Markets

The Role of Proximity in Secondary Equity Markets

Chapter:
(p.140) 6 The Role of Proximity in Secondary Equity Markets
Source:
Managing Financial Risks
Author(s):

Dariusz Wójcik (Contributor Webpage)

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199557431.003.0007

This chapter analyses the role of proximity between investors and corporations with equity traded on public secondary equity markets in financial risk management. Combining insights from recent research on home and local bias in financial economics, with economic geographical research on proximity and financial markets, that proximity, even if defined narrowly as geographical proximity, has significant implications for: investors (in terms of performance and trade-off with liquidity); the investment industry as a whole (in terms of size, structure, and strategy); issuers (in terms of access to capital and liquidity); communities (in terms of herd behaviour and financial literacy); and policy makers (in terms of market structure, competition, and international harmonization). The consideration for cognitive, social, organizational, and institutional proximity enriches the understanding of secondary equity markets, by complementing the analysis of geographical proximity, but does not make the latter redundant.

Keywords:   global finance, risk management, proximity, local bias, equity markets

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