Publication Type
Journal Article
Version
submittedVersion
Publication Date
8-2024
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
Volume
51
Issue
7-8
First Page
2239
Last Page
2274
ISSN
0306-686X
Identifier
10.1111/jbfa.12782
Publisher
Wiley
Citation
JIN, Zuben and LI, Frank Weikai.
Geographic links and predictable returns. (2024). Journal of Business Finance and Accounting. 51, (7-8), 2239-2274.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/6593
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1111/jbfa.12782
