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Investor bias in favor of geographically close firms has been documented in previous papers. An implication of this bias is that, if local events cause nearby investors to trade together, then the correlation of stock returns of pairs of firms will increase as the distance between them decreases. We test this hypothesis using a sample of Standard & Poors 500 (S&P) companies. After adjusting for industry effects and other factors, we find that the correlation coefficient between two stocksdoi:10.1080/15427560701684884 fatcat:qucl76tadvgublyoef44f374fm