Geographic Dispersion and Stock Returns
51 Pages Posted: 22 Mar 2010 Last revised: 18 Sep 2012
Date Written: January 17, 2012
Abstract
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.
Keywords: Geography, Geographic Dispersion, Location, Local, Stock Returns
JEL Classification: A12,G14
Suggested Citation: Suggested Citation
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