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Who you know, not what you know

He began from the premise that if professional investors are better than retail investors at interpreting publicly available information, then they should be as likely to beat the market by investing in stocks based a long way away from them as they are when they invest in more local stocks. After all, the public information released by, say, a California-based company is equally available to a California-based investor as a Connecticut-based one. The two are on a level playing field, so skill at interpreting information should lead to better performance by either.

But there is no such outperformance. Mr Sulaeman studied fund managers' trades between 1999 and 2010 and found that when they bought and sold shares in companies based outside their home state they did no better than the market.

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