Headquarter Location Effect
Log in to collectAcademic paper
Near is Dear: Remoteness, Soft Information, and Stock Returns
Chao Gao; Wen Zeng
- Australian National University
- ?Australian National University, RSFAS
- ?Australian National University (ANU)
Strategy in a nutshell
Universe: U.S. stocks (NYSE, NASDAQ, AMEX). Compute Remote6h (remoteness) using firm headquarters location and population accessibility. Sort stocks into deciles monthly and form a spread portfolio: long most remote firms (high decile) and short most proximate firms (low decile). Portfolios are value-weighted and rebalanced monthly.
Economic rationale
Remote firms consistently outperform due to information frictions. The market requires a premium for holding geographically remote firms, with return predictability mitigated by operational dispersion. Post-earnings announcement drift is mainly observed for remote firms.
Backtest performance
Annualised return8.52%
Volatility14.41%
Sharpe ratio0.59