IDEAS home Printed from https://ideas.repec.org/a/cup/jfinqa/v53y2018i05p1937-1961_00.html
   My bibliography  Save this article

Know Thy Neighbor: Industry Clusters, Information Spillovers, and Market Efficiency

Author

Listed:
  • Engelberg, Joseph
  • Ozoguz, Arzu
  • Wang, Sean

Abstract

Firms in industry clusters have market prices that are more efficient than firms outside clusters. To establish causality, we analyze exogenous firm relocations and find that firms that relocate into industry clusters have higher levels of industry information in their prices. We argue that geographical proximity allows for information spillovers, reducing marginal cost to information producers. Our evidence supports this view: Analysts are more likely to cover stocks inside industry clusters, and when institutional investors have a large position in one stock in the industry cluster, they are more likely to hold other stocks in the same industry cluster.

Suggested Citation

  • Engelberg, Joseph & Ozoguz, Arzu & Wang, Sean, 2018. "Know Thy Neighbor: Industry Clusters, Information Spillovers, and Market Efficiency," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 53(5), pages 1937-1961, October.
    • Handle: RePEc:cup:jfinqa:v:53:y:2018:i:05:p:1937-1961_00
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S0022109018000261/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Vadim S. Balashov & Zhanel B. DeVides, 2020. "Is Diversification A Job Safety Net For Sell‐Side Analysts?," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 43(3), pages 543-573, August.
    2. Harris, Oneil & Karl, J. Bradley & Lawrence, Ericka, 2019. "CEO compensation and earnings management: Does gender really matters?," Journal of Business Research, Elsevier, vol. 98(C), pages 1-14.
    3. Wang, Sean, 2019. "Informational environments and the relative information content of analyst recommendations and insider trades," Accounting, Organizations and Society, Elsevier, vol. 72(C), pages 61-73.
    4. William Grieser & James LeSage & Morad Zekhnini, 2022. "Industry Networks and the Geography of Firm Behavior," Management Science, INFORMS, vol. 68(8), pages 6163-6183, August.
    5. Ge, Shuyi & Li, Shaoran & Linton, Oliver, 2023. "News-implied linkages and local dependency in the equity market," Journal of Econometrics, Elsevier, vol. 235(2), pages 779-815.
    6. Sorabh Tomar, 2023. "Greenhouse Gas Disclosure and Emissions Benchmarking," Journal of Accounting Research, Wiley Blackwell, vol. 61(2), pages 451-492, May.
    7. Giulia Baschieri & Andrea Carosi & Stefano Mengoli, 2023. "Local IPO waves, local shocks, and the going public decision," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2565-2589, July.
    8. Anagol, Santosh & Balasubramaniam, Vimal & Ramadorai, Tarun, 2021. "Learning from noise: Evidence from India’s IPO lotteries," Journal of Financial Economics, Elsevier, vol. 140(3), pages 965-986.
    9. Ge, S., 2020. "Text-Based Linkages and Local Risk Spillovers in the Equity Market," Cambridge Working Papers in Economics 20115, Faculty of Economics, University of Cambridge.
    10. Li, Jianqiang & Shan, Yaowen & Tian, Gary & Hao, Xiangchao, 2020. "Labor cost, government intervention, and corporate innovation: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 64(C).
    11. Grieser, William & Maturana, Gonzalo & Spyridopoulos, Ioannis & Truffa, Santiago, 2022. "Agglomeration, knowledge spillovers, and corporate investment," Journal of Corporate Finance, Elsevier, vol. 77(C).
    12. Xingwei Li & Jingru Li & Yicheng Huang & Jinrong He & Xiang Liu & Jiachi Dai & Qiong Shen, 2022. "Construction enterprises’ adoption of green development behaviors: an agent-based modeling approach," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-11, December.
    13. Lucía Bolea & Rosa Duarte & Geoffrey J. D. Hewings & Sofía Jiménez & Julio Sánchez‐Chóliz, 2022. "The role of regions in global value chains: an analysis for the European Union," Papers in Regional Science, Wiley Blackwell, vol. 101(4), pages 771-794, August.
    14. Jang, In Ji & Kang, Namho & Yezegel, Ari, 2022. "Common ownership, price informativeness, and corporate investment," Journal of Banking & Finance, Elsevier, vol. 135(C).
    15. Meghana Ayyagari & Yuxi Cheng & Ariel Weinberger, 2022. "Surviving Pandemics: The Role of Spillovers," CESifo Working Paper Series 9891, CESifo.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:jfinqa:v:53:y:2018:i:05:p:1937-1961_00. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/jfq .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.