Revisiting the Question - Does Corporate Headquarters Location Matter for Stock Returns?

18 Pages Posted: 13 Nov 2008

See all articles by Kenneth P. Moon

Kenneth P. Moon

Texas State University, San Marcos - Department of Finance and Economics; University of Northern Colorado - Kenneth W. Montfort College of Business

James P. LeSage

Texas State University - McCoy College of Business Administration

Date Written: November 11, 2008

Abstract

We show that the ordinary least-squares method used by Pirinsky and Wang (2006) suffers from an endogeneity problem leading to biased and inconsistent estimates. A maximum likelihood estimation procedure that will produce consistent estimates for their model is set forth. This is done using an equivalent reformulation of their model and techniques for modeling data that exhibit observation-level dependence. In addition, we show how to correctly interpret the consistent maximum likelihood parameter estimates from the reformulated model in the context of their application.

Keywords: dependent observations, local market indices, spatial relations

JEL Classification: C21, G11

Suggested Citation

Moon, Kenneth P. and LeSage, James P., Revisiting the Question - Does Corporate Headquarters Location Matter for Stock Returns? (November 11, 2008). Available at SSRN: https://ssrn.com/abstract=1300560 or http://dx.doi.org/10.2139/ssrn.1300560

Kenneth P. Moon (Contact Author)

Texas State University, San Marcos - Department of Finance and Economics ( email )

San Marcos, TX 78666
United States

University of Northern Colorado - Kenneth W. Montfort College of Business ( email )

Kepner Hall
800 17th Street
Greeley, CO 80639
United States

James P. LeSage

Texas State University - McCoy College of Business Administration ( email )

Finanace and Economics Department
601 University Drive
San Marcos, TX 78666
United States
512-245-0256 (Phone)
512-245-3089 (Fax)

HOME PAGE: http://www.spatial-econometrics.com

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