The Geography of Value Creation   Over the last twenty years, the stock market indicates that value creation has become heavily concentrated in a few headquarter cities. At the same time, firms in value-creating cities have experienced declines in their profitability, due to large increases in wages and rents. Our findings thus highlight the difference between flow-based (e.g., operating profits) and stock-based (e.g., securities prices) indicators of local productivity. Conventional proxies for a city’s appeal to high value-added workers, such as education rates and weather, are positively related to stock market valuations, but negatively related to near-term operating performance.    
Prof. Sheridan Titman is professor Finance and Chair of Financial Services at the University of Texas, Austin. He is also the director of the Energy Management and Innovation Center at UT.

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