Does Corporate Headquarters Location Matter for Stock Returns?
Article first published online: 3 AUG 2006
The Journal of Finance
Volume 61, Issue 4, pages 1991–2015, August 2006
How to Cite
PIRINSKY, C. and WANG, Q. (2006), Does Corporate Headquarters Location Matter for Stock Returns?. The Journal of Finance, 61: 1991–2015. doi: 10.1111/j.1540-6261.2006.00895.x
- Issue published online: 3 AUG 2006
- Article first published online: 3 AUG 2006
We document strong comovement in the stock returns of firms headquartered in the same geographic area. Moreover, stocks of companies that change their headquarters location experience a decrease in their comovement with stocks from the old location and an increase in their comovement with stocks from the new location. The local comovement of stock returns is not explained by economic fundamentals and is stronger for smaller firms with more individual investors and in regions with less financially sophisticated residents. We argue that price formation in equity markets has a significant geographic component linked to the trading patterns of local residents.