Distance Effect On Stock Price Co-movement

Chinese stock market develops gradually matured which becomes an important channel for financial resource allocation.But the stock co-movement is very significant.The co-movement refers to that the stock price move in the same direction together during the same period.Now the academic circles have been researched deeply on the regional co-movement.Based on the previous research results,we investigate how the geographic distance between firms'headquarters affects their stock price co-movement.We have researched the regional co-movement and stock price co-movement by three parts of empirical analysis.In the first part we begin our analysis of the price co-movement between a stock and portfolio,the portfolio is formed by geographic distance.The results show that the price co-movement is existence significantly,the price co-movement is negatively correlated with the distance between firms.The second part of the empirical study continues the first part of formula,we research the co-movement between stock and portfolio in the different market quotation.The results show that whether the market is in a bull market,bear market,or shock period,the price co-movement all exist,but different period have different significant price co-movement,when the market in the bear market,the price co-movement is the most significant.In the third part,we adopt more direct approach by regression the price co-movement on the distance between any two firms.The results show that the price co-movement is negatively correlated with the distance between firms,and we also find that if two firms on the same province or center city will enhance their stock price co-movement.