Offshore Activities and Consumption Risk

Gerard Hoberg

University of Maryland - Department of Finance

Katie Moon

Securities and Exchange Commission (SEC)

July 30, 2014

Robert H. Smith School Research Paper

We use 10-K filings to construct novel text-based measures of the extent to which publicly traded U.S. firms are exposed to three types of offshore activities: the sale of output, the purchase of input, and the ownership of assets that produce input. Our framework has three advantages: we comprehensively 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 consumption growth risk is significantly priced in the U.S. equity market through exposure to offshore sales. In contrast, offshore purchasing of inputs serves as a hedge. We report country-level consumption risk premia, which are higher in Europe and Africa, and lower in Asia.

Number of Pages in PDF File: 60

Keywords: Offshore Activities, Global Consumption Risk, Consumption CAPM, Country Risk Premium

JEL Classification: D23, F14, F23, G12, G15

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Date posted: January 2, 2014 ; Last revised: July 31, 2014

Suggested Citation

Hoberg, Gerard and Moon, Katie, Offshore Activities and Consumption Risk (July 30, 2014). Robert H. Smith School Research Paper. Available at SSRN: http://ssrn.com/abstract=2373797 or http://dx.doi.org/10.2139/ssrn.2373797

Contact Information

Gerard Hoberg
University of Maryland - Department of Finance ( email )
Robert H. Smith School of Business
Van Munching Hall
College Park, MD 20742
United States
HOME PAGE: http://www.rhsmith.umd.edu/finance/faculty/hoberg.aspx
Katie Moon (Contact Author)
Securities and Exchange Commission (SEC) ( email )
100 F Street, NE
Washington, DC 20549
United States
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