Geographic Dispersion and Stock Returns

51 Pages Posted: 22 Mar 2010 Last revised: 18 Sep 2012

See all articles by Diego Garcia

Diego Garcia

University of Colorado at Boulder - Leeds School of Business

Oyvind Norli

BI Norwegian Business School - Department of Financial Economics; European Corporate Governance Institute (ECGI)

Date Written: January 17, 2012

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 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.

Keywords: Geography, Geographic Dispersion, Location, Local, Stock Returns

JEL Classification: A12,G14

Suggested Citation

Garcia, Diego and Norli, Oyvind, Geographic Dispersion and Stock Returns (January 17, 2012). Journal of Financial Economics (JFE), Forthcoming, AFA 2012 Chicago Meetings Paper, Available at SSRN: https://ssrn.com/abstract=1573031 or http://dx.doi.org/10.2139/ssrn.1573031

Diego Garcia

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

Oyvind Norli (Contact Author)

BI Norwegian Business School - Department of Financial Economics ( email )

Nydalsveien 37
Oslo, N-0442
Norway
+4746410514 (Phone)

HOME PAGE: http://https://home.bi.no/oyvind.norli/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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