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Does Corporate Headquarters Location Matter for Stock Returns?




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    • Christo Pirinsky is from Mays Business School, Texas A&M University and Qinghai Wang is from the School of Business Administration, University of Wisconsin Milwaukee. We thank Kerry Back, Bing Han, Andrew Karolyi, Eric Kelley, John Griffin, Sorin Sorescu, Robert Stambaugh (the editor), Rene Stulz, and an anonymous referee for helpful comments.


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.