Geography, Local Sentiment, and Market Anomalies

50 Pages Posted: 20 Nov 2018 Last revised: 26 Nov 2019

See all articles by Mehrshad Motahari

Mehrshad Motahari

University of Cambridge - Judge Business School

Date Written: November 25, 2019


This study shows that market anomalies are stronger for stocks headquartered in states with a history of better anomaly performance. Using a combined measure of mispricing based on 11 prominent anomaly strategies, I find that the level of mispricing for a firm's geographic peers predicts how mispriced the firm itself will be in the future. I find similar results when I consider industrial peers instead, but the effect of neither group is absorbed by the other. States in which firm mispricing is more prevalent are those experiencing relatively higher levels of local investor sentiment and better local macroeconomic conditions. Finally, evidence indicates that the predictability of mispricing based on geography and industry is concentrated on stocks with high levels of analyst forecasting errors.

Keywords: Anomalies, Local Predictability, Mispricing, Sentiment, Industry

JEL Classification: G12, G14

Suggested Citation

Motahari, Mehrshad, Geography, Local Sentiment, and Market Anomalies (November 25, 2019). Available at SSRN: or

Mehrshad Motahari (Contact Author)

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics