Firm Location and the Value-Growth Premium
63 Pages Posted: 8 Jun 2021 Last revised: 10 May 2022
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
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