Does geographic location matter to stock return predictability?

Sabri Boubaker, Imed Chkir, Lamia Chourou and Samir Saadi

Journal of Forecasting, 2019, vol. 38, issue 4, 311-326

Abstract: Building on recent and growing evidence that geographic location influences information diffusion, this paper examines the relation between firm's location and the predictability of stock returns. We hypothesize that returns on a portfolio composed of firms located in central areas are more likely to follow a random walk than returns on a portfolio composed of firms located in remote areas. Using a battery of variance ratio tests, we find strong and robust support for our prediction. In particular, we show that the returns on a portfolio composed of the 500 largest urban firms follow a random walk; however, all variance ratio tests reject the random walk hypothesis for a portfolio that includes the 500 largest rural firms. Our results are robust to alternative definitions of firm's location and portfolio formation.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1002/for.2556

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:jforec:v:38:y:2019:i:4:p:311-326

Access Statistics for this article

Journal of Forecasting is currently edited by Derek W. Bunn

More articles in Journal of Forecasting from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().