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In this article, we examine commonality in liquidity of firms headquartered in the same states and how the local liquidity commonality is influenced by firm-and statelevel characteristics. We document strong liquidity comovement of nearby firms. Moreover, firms that change headquarters location experience a decrease in their liquidity commonality with firms in the old states and an increase in their liquidity commonality with firms in the new states. Our findings show that both firm-and state-level characteristics determine local liquidity comovement. Local liquidity commonality is stronger for firms with smaller size and lower level of institutional ownership. Our results also suggest that state-level volatility, state personal income, state investment income, and state turnover commonality explain the local component of liquidity commonality. We further document that the four state-level factors perform differently during volatile market periods.

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