Stock Price Comovement and Location Effect Open Access

Zhu, Sichen (Spring 2020)

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I investigate stock return comovement based on locations over the period from 1988 to 2018. It is found that while the comovement effect is significant in the first half of the sample, it gradually declines to zero over years. Two possible factors, the Great Recession and market efficiency, that may have caused this gradual decline are also tested. I argue that the Great Recession is not the key reason that explains this decline in comovement effect. Furthermore, a qualitative study on asset values managed by operating hedge funds suggests that the growing trend for hedge funds increases the overall market efficiency, thus contributing to this decline.

Table of Contents

Introduction and Literature Review 1

Data Availability 3

Methodology and Results 8

Conclusion 11

Appendix 15

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