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Geographic dispersion and stock returns

  • García, Diego
  • Norli, Øyvind

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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File URL: http://www.sciencedirect.com/science/article/pii/S0304405X1200133X
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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
DOI: 10.1016/j.jfineco.2012.06.007
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505576

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