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Does distance affect performance? Investigating the relationship between spatial proximity of stock holdings and mutual fund performance
GIS is used to examine how geographic proximity between the headquarters locations of mutual funds and the headquarters of the companies whose stocks are held by mutual funds (i.e. holdings) and the return on investment. Various studies find that the returns of holdings that are geographically proximate to their funds generate higher returns than holdings that are distantly located. It is hypothesized that as the distance between funds and their holdings increases, the returns will decrease. It is found that the number of stock purchases does decrease as distance increases; however, returns only marginally decrease as distance increases up to a point (about 1000 miles) before, rising substantially further.