Offshore Activities and Consumption Risk
University of Southern California - Marshall School of Business
S. Katie Moon
University of Colorado at Boulder - Leeds School of Business
July 15, 2015
Robert H. Smith School Research Paper
We use 10-K filings to construct novel text-based measures of the extent to which U.S. firms are exposed to three offshore activities: the sale of output, purchase of input, and ownership of producing assets. Our framework has three advantages: we account for activities in all nations, we assess returns in a single market which mitigates market segmentation bias, and we use direct text-based measures of risk exposures to reduce error in variables. We find that global consumption growth risk is priced in the U.S. equity market through offshore sales. In contrast, offshore purchasing of inputs serves as a hedge.
Number of Pages in PDF File: 54
Keywords: Offshore Activities, Global Consumption Risk, Consumption CAPM, Country Risk Premium
JEL Classification: D23, F14, F23, G12, G15
Date posted: January 2, 2014 ; Last revised: July 16, 2015
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