Konferenzbeitrag
Regional Economic Activity and Stock Returns
This study analyzes the impact of regional economic conditions on stock returns. I identify all U.S. states that are economically relevant for a firm through textual analysis of annual reports and construct a novel proxy for regional economic activity. Using this proxy, I find that economic conditions of firm-relevant U.S. regions positively influence stock returns on a monthly basis. This finding is robust to short-term reversal, individual stock momentum, industry momentum, geographic dispersion and a list of standard controls. Additionally, these results indicate that information arising from all relevant states matters over and above the information content of the mere headquarter state. Furthermore, I show that forecasts on regional economic activity predict stock returns. A zero-cost trading strategy based on this new predictive variable generates a risk-adjusted return of 6.3 (8.3) percent per year using an equal-weighted (value-weighted) portfolio. Evidence indicates that forecasts of regional activity also predict firms' real operations, suggesting that economic conditions of U.S. regions capture an important cash flow component of stock returns. Finally, this study shows that information on regional economic activity is gradually incorporated into stock prices and that the return predictability is stronger among difficult-to-arbitrage firms.
- Sprache
-
Englisch
- Erschienen in
-
Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2015: Ökonomische Entwicklung - Theorie und Politik - Session: International Macroeconomics ; No. A09-V3
- Klassifikation
-
Wirtschaft
Asset Pricing; Trading Volume; Bond Interest Rates
Information and Market Efficiency; Event Studies; Insider Trading
Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
- Ereignis
-
Geistige Schöpfung
- (wer)
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Smajlbegovic, Esad
- Ereignis
-
Veröffentlichung
- (wann)
-
2015
- Handle
- Letzte Aktualisierung
-
20.09.2024, 08:24 MESZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Konferenzbeitrag
Beteiligte
- Smajlbegovic, Esad
Entstanden
- 2015
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