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Location-specific stock market indices: An exploration

Location-specific stock market indices: An exploration
Location-specific stock market indices: An exploration
This article develops an alternative location-specific stock market index driven by investors’ ‘attachment’ towards investment at a specific location. We evaluate the performance of hypothetical stock market indices that track companies based on their state of registration, taking the US stock market as our case. Using annual data since 1980 we present raw, risk-adjusted and value-weighted state portfolios’ returns to study the extent to which stock market performance varies by state-level demographics and economic factors. A dynamic panel data estimation – with and without spatial spillover effects – is employed to establish a strong association between stock price performance and the state-level (or geography-weighted) factors. We find that spatial effects are strong and that the ‘spatial attachment’ of companies in interaction with the various location-specific variables imparts an overarching influence on stock-price performance. Comparison of model performances further supports our claims.
State Index; State Portfolios; Portfolio Choice; Investment Decisions; Spatial Spillover Effects; Dynamic spatial panel estimation
1351-847X
305-337
Jory, Surendranath
2624eb24-850a-48f6-b3c6-c96749b87322
Mishra, Tapas
218ef618-6b3e-471b-a686-15460da145e0
Ngo, Thanh
852ea7b9-fd74-4a39-9281-87626e50886b
Jory, Surendranath
2624eb24-850a-48f6-b3c6-c96749b87322
Mishra, Tapas
218ef618-6b3e-471b-a686-15460da145e0
Ngo, Thanh
852ea7b9-fd74-4a39-9281-87626e50886b

Jory, Surendranath, Mishra, Tapas and Ngo, Thanh (2019) Location-specific stock market indices: An exploration. European Journal of Finance, 25 (4), 305-337. (doi:10.1080/1351847X.2018.1515095).

Record type: Article

Abstract

This article develops an alternative location-specific stock market index driven by investors’ ‘attachment’ towards investment at a specific location. We evaluate the performance of hypothetical stock market indices that track companies based on their state of registration, taking the US stock market as our case. Using annual data since 1980 we present raw, risk-adjusted and value-weighted state portfolios’ returns to study the extent to which stock market performance varies by state-level demographics and economic factors. A dynamic panel data estimation – with and without spatial spillover effects – is employed to establish a strong association between stock price performance and the state-level (or geography-weighted) factors. We find that spatial effects are strong and that the ‘spatial attachment’ of companies in interaction with the various location-specific variables imparts an overarching influence on stock-price performance. Comparison of model performances further supports our claims.

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EJoF FinalVersion-Prof Adcock1782018 - Accepted Manuscript
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Accepted/In Press date: 16 August 2018
e-pub ahead of print date: 29 August 2018
Published date: 4 March 2019
Keywords: State Index; State Portfolios; Portfolio Choice; Investment Decisions; Spatial Spillover Effects; Dynamic spatial panel estimation

Identifiers

Local EPrints ID: 423842
URI: http://eprints.soton.ac.uk/id/eprint/423842
ISSN: 1351-847X
PURE UUID: f6531b0a-0868-4641-96a7-8fa6c7ac3264
ORCID for Surendranath Jory: ORCID iD orcid.org/0000-0002-8265-0001
ORCID for Tapas Mishra: ORCID iD orcid.org/0000-0002-6902-2326

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Date deposited: 02 Oct 2018 16:30
Last modified: 28 Apr 2022 04:18

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Contributors

Author: Tapas Mishra ORCID iD
Author: Thanh Ngo

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