Geographic Dispersion and Stock Returns
University of North Carolina at Chapel Hill - Finance Area
Norwegian School of Management - Department of Financial Economics
January 17, 2012
Journal of Financial Economics (JFE), Forthcoming
AFA 2012 Chicago Meetings Paper
This paper shows that stocks of truly local firms have returns that exceed the return on stocks of geographically dispersed firms by 70 basis points per month. By extracting state name counts from annual reports filed with the SEC on form 10-K, we distinguish firms with business operations in only a few states from firms with operations in multiple states. Our findings are consistent with the view that lower investor recognition for local firms results in higher stock returns to compensate investors for insufficient diversification.
Number of Pages in PDF File: 51
Keywords: Geography, Geographic Dispersion, Location, Local, Stock Returns
JEL Classification: A12,G14Accepted Paper Series
Date posted: March 22, 2010 ; Last revised: September 18, 2012
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