Does Foreign Information Predict the Returns of Multinational Firms Worldwide?

Item Type Journal paper
Abstract

We investigate whether value-relevant foreign information only gradually dilutes into stock prices of multinational firms worldwide. Using an international sample of firms from 22 developed countries, we find that a portfolio strategy based on firms' foreign sales information yields future returns of more than 10% p.a. globally. The return spread due to foreign information is substantial across different geographical regions and cannot be explained by traditional risk factors, firm characteristics, and industry momentum. Our results are in line with limited attention of investors being the main driver of this effect worldwide.

Authors Finke, Christian & Weigert, Florian
Journal or Publication Title Review of Finance
Language English
Keywords Foreign information, return predictability, limited attention
Subjects business studies
finance
HSG Classification contribution to scientific community
HSG Profile Area SEPS - Economic Policy
Refereed Yes
Date October 2017
Publisher Oxford Univ. Press
Place of Publication Oxford
Series Name School of Finance Working Paper Series
Volume 21
Number 6
Page Range 2199-2248
ISSN 1572-3097
ISSN-Digital 1875-824X
Publisher DOI 10.1093/rof/rfw070
Depositing User Prof. Dr. Florian Weigert
Date Deposited 24 Sep 2015 14:18
Last Modified 06 Jul 2018 09:06
URI: https://www.alexandria.unisg.ch/publications/244137

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Citation

Finke, Christian & Weigert, Florian (2017) Does Foreign Information Predict the Returns of Multinational Firms Worldwide? Review of Finance, 21 (6). 2199-2248. ISSN 1572-3097

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https://www.alexandria.unisg.ch/id/eprint/244137
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