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Does Corporate Headquarters Location Matter for Stock Returns?
Author(s) -
PIRINSKY CHRISTO,
WANG QINGHAI
Publication year - 2006
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2006.00895.x
Subject(s) - stock (firearms) , equity (law) , business , location , stock price , monetary economics , economics , financial economics , geography , paleontology , archaeology , geodesy , series (stratigraphy) , political science , law , biology
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.