Interstate migration networks and stock return comovement

Abstract

We document sizable and robust excess return comovement between migration-flow receiving and sending states at the state-portfolio level. Migration comovement is not fully explained by economic fundamentals and strengthens with the size of the migration network. Consistent with the view that it is partially driven by correlated trading of a common investor base within migration networks, migration comovement a) increases substantially when there is an exogenous positive shock to migration flows, b) is greater with old firms in migration-sending states, and c) strengthens when retail investors display “old home” bias in addition to local bias.