Publication Type

Journal Article

Version

submittedVersion

Publication Date

1-2024

Abstract

Using establishment-level data of U.S. public firms, we construct a novel measure of geographic linkage between firms. We show that the returns of geography-linked firms have strong predictive power for focal firm returns and fundamentals. This effect is distinct from other cross-firm return predictability and is not easily attributable to risk-based explanations. It is more pronounced for focal firms that receive lower investor attention, are more costly to arbitrage, and during high sentiment periods. The cross-firm information spillovers and return predictability are also stronger for geographic peers with economic linkages and with positive information. Our results are broadly consistent with sluggish price adjustment to nuanced geographic information.

Keywords

Geography, Limited attention, Cross-asset momentum, Market efficiency

Discipline

Finance | Finance and Financial Management

Research Areas

Finance

Publication

Journal of Business Finance and Accounting

First Page

1

Last Page

36

ISSN

0306-686X

Identifier

10.1111/jbfa.12782

Publisher

Wiley

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1111/jbfa.12782

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