Does Firm Geographic Location Matter to Stock Market Efficiency?

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Title: Does Firm Geographic Location Matter to Stock Market Efficiency?
Authors: Saadi, Samir
Ni, Yang
Chkir, Imed
Date: 2011-01-05
Abstract: This paper builds on recent and growing evidence that firms’ as well investors’ geographic locations influence information diffusion and re-examines the mixed results in the efficient market hypothesis within the U.S. stock market. We hypothesize that returns on a portfolio (such as stock market index) composed of firms located in urban areas are more likely to follow random walk than returns on portfolio composed of firms located in urban areas. Using a battery of variance ration tests, we find strong and robust support for our prediction. In particular, we report that the returns on a portfolio composed of the 500 largest urban firms follow random walk, however all variance ratio tests reject the random walk hypothesis for portfolio that includes the 500 largest rural firms.
URL: http://hdl.handle.net/10393/19686
http://dx.doi.org/10.20381/ruor-2580
CollectionTelfer - Documents de travail // Telfer - Working Papers
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