Study Reveals Company Location Influences Investment Returns More Than Growth Potential
Company location, rather than growth, may lead to higher investment returns

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A study from Penn State indicates that investors may achieve higher returns by focusing on a company's location rather than its growth potential. Portfolios considering company headquarters and regional housing markets could yield returns three times greater than those centered on growth stocks alone.
- 01The study analyzed 9,308 companies across three U.S. stock exchanges from 2000 to 2019.
- 02Companies in expensive areas like Silicon Valley and New York face higher operational costs, impacting investor returns.
- 03The research proposes a new model combining finance, real estate, and urban economics to explain the value-growth premium.
- 04Value stocks, representing stable companies, consistently outperform growth stocks, which are often seen as more exciting investments.
- 05Local governments can attract businesses by ensuring affordable housing, which can help reduce labor costs for firms.
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A recent study from Penn State University challenges traditional investment strategies by suggesting that a company's location may be more critical than its growth potential for achieving higher investment returns. The researchers found that portfolios designed to consider both company headquarters and regional housing markets could generate returns three times higher than those focused solely on growth stocks. The analysis, published in the *Journal of Empirical Finance*, examined 9,308 companies from 2000 to 2019. It revealed that firms in high-cost areas like Silicon Valley and New York incur significant operational expenses, which detracts from returns to investors. The study combines finance and real estate models, addressing the long-standing 'value-growth premium' phenomenon, where value stocks outperform growth stocks. Co-author Timothy T. Simin emphasized the importance of location in investment strategy, stating, "Where firms locate their headquarters matters." The findings suggest that local governments aiming to attract businesses should focus on making housing affordable to reduce labor costs, ultimately benefiting both firms and investors.
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This study highlights the importance of location in investment strategies, which can influence local economic policies and housing affordability initiatives.
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