Open AccessGeography Of Stock Returns: Evidence From An Emerging Market
Author(s) -
Omar Farooq,
Molk Kadiri Hassani
Publication year - 2013
Publication title -
journal of applied business research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.149
H-Index - 22
eISSN - 2157-8834
pISSN - 0892-7626
DOI - 10.19030/jabr.v29i3.7775
Subject(s) - stock (firearms) , stock exchange , stock market , economics , monetary economics , finance , geography , context (archaeology) , archaeology
Does location of corporate headquarters matter for stock returns? Do investors prefer to invest in firms located near them? This study aims to answer these questions by using a large dataset of stock returns for firms listed at the Bombay Stock Exchange during the period between 2003 and 2007. Our results show that stock returns of firms show a strong degree of co-movement with stock returns of other firms located in the same city as them. Interestingly, we also show that this degree of co-movement goes down with firms located in the neighboring cities. We also show that stock returns of firms exhibit the least degree of co-movement with firms that are located farther from the neighboring cities. Furthermore, our results show that this degree of co-movement in stock returns is increasing over the period of time. Our results are consistent with prior literature that considers location as an important determinant of stock returns.