Local labor market and the cross section of stock returns

Yao Ge, Zheng Qiao and Hao Zheng

Journal of International Money and Finance, 2023, vol. 138, issue C

Abstract: Local labor market pooling is a crucial benefit in the economics of agglomeration (Marshall, 1890). To capture the pooling function, we employ segment information and occupation statistics to capture average pairwise labor force similarities for each focal firm. We find that firms in thicker local labor markets are underpriced and display significantly positive stock returns afterwards. The return predictability of local labor market measure is concentrated in non-mega cap firms; high-tech firms; younger firms; and firms with more high-skilled labor, less routine tasks, and lower labor intensity. Our results are robust to a battery of control variables and alternative measure specifications.

Keywords: Agglomeration; Local labor market; Stock returns; Mispricing (search for similar items in EconPapers)
JEL-codes: G12 G4 J61 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:138:y:2023:i:c:s0261560623001262

DOI: 10.1016/j.jimonfin.2023.102925

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