Firm Location and the Value-Growth Premium
- Resource Type
- Authors
- Yifan Chen; Brent W. Ambrose; Timothy T. Simin
- Source
- SSRN Electronic Journal.
- Subject
- History
Urban economics
House price
Returns to scale
Polymers and Plastics
Value (economics)
Value premium
Economics
Monetary economics
Business and International Management
Investment (macroeconomics)
Industrial and Manufacturing Engineering
Stock (geology)
- Language
- ISSN
- 1556-5068
We investigate the value-growth premium puzzle by merging insights from urban economics and finance that relate firm location to its stock performance. The value-growth premium in locations with high historical house price appreciation is 3.6% larger per year than the premium in areas that experienced little house price appreciation. The link between housing value appreciation and the cross-section of returns supports investment-based models explaining the value premium; moreover we find the house price channel reduces growth firm returns rather than increasing returns of value firms. House price appreciation remains significant after controlling for common explanations of the premium.