Firm Location and the Value-Growth Premium

63 Pages Posted: 8 Jun 2021 Last revised: 10 May 2022

See all articles by Brent W. Ambrose

Brent W. Ambrose

Pennsylvania State University - Department of Insurance & Real Estate

Yifan Chen

Pennsylvania State University

Timothy T. Simin

Pennsylvania State University

Date Written: May 10, 2022

Abstract

We investigate the value-growth premium puzzle by merging insights from urban economics and finance that relate firm location to its stock performance. The value-growth premium in locations with high historical house price appreciation is 3.6% larger per year than the premium in areas that experienced little house price appreciation. The link between housing value appreciation and the cross-section of returns supports investment-based models explaining the value premium; moreover we find the house price channel reduces growth firm returns rather than increasing returns of value firms. House price appreciation remains significant after controlling for common explanations of the premium.

Keywords: Value, Growth, Value premium, Firm location

JEL Classification: E44, G12, R30

Suggested Citation

Ambrose, Brent W. and Chen, Yifan and Simin, Timothy T., Firm Location and the Value-Growth Premium (May 10, 2022). Available at SSRN: https://ssrn.com/abstract=3861819 or http://dx.doi.org/10.2139/ssrn.3861819

Brent W. Ambrose (Contact Author)

Pennsylvania State University - Department of Insurance & Real Estate ( email )

Smeal College of Business,
Penn State University
University Park, PA US-0-PA 16802
United States
8148670066 (Phone)

HOME PAGE: http://https://sites.psu.edu/brentwambrose/

Yifan Chen

Pennsylvania State University ( email )

University Park
PA 16802
United States

Timothy T. Simin

Pennsylvania State University ( email )

University Park, PA 16802
United States
814-865-3457 (Phone)

HOME PAGE: http://timsimin.net

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