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Geographic dispersion and stock returns

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  • García, Diego
  • Norli, Øyvind

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 Securities and Exchange Commission (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.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 106 (2012)
Issue (Month): 3 ()
Pages: 547-565

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Handle: RePEc:eee:jfinec:v:106:y:2012:i:3:p:547-565

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Web page: http://www.elsevier.com/locate/inca/505576

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Keywords: Geography; Geographic dispersion; Location; Local; Stock returns;

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References

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Cited by:
  1. Yen-Teik Lee & Bang Dang Nguyen & Quoc-Anh Do, 2013. "Political Connections and Firm Value: Evidence from the Regression Discontinuity Design of Close Gubernatorial Elections," Sciences Po publications 15, Sciences Po.
  2. Joan Farre-Mensa & Alexander Ljungqvist, 2013. "Do Measures of Financial Constraints Measure Financial Constraints?," NBER Working Papers 19551, National Bureau of Economic Research, Inc.
  3. Thomas Wu & Jordi Mondria, 2011. "Asymmetric Attention and Stock Returns," 2011 Meeting Papers 134, Society for Economic Dynamics.
  4. repec:spo:wpecon:info:hdl:2441/7o52iohb7k6srk09n0dcia0po is not listed on IDEAS

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