Interstate Migration Networks and Stock Return Comovement

We document sizable and robust excess return comovement between migration-flow receiving and sending states at both the individual stock and state-portfolio levels. 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) decreases substantially when ability to trade is exogenously curtailed and when firms relocate their headquarters out of state, b) strengthens when retail investors display “old home” bias in addition to local bias, and c) exacerbates mispricing