We show that the local bias in US mutual fund portfolios varies significantly over time and is more pronounced at times of heightened market uncertainty, such as during financial crises. Similarly, local bias is less pronounced in periods when market sentiment is strong. These results do not...

We show that after the revelation of corporate fraud in a state, household stock market participation in that state decreases. Households decrease their holdings in fraudulent as well as non-fraudulent firms, even if they did not hold stocks in fraudulent firms. Within a state, households with...