How Important are Foreign Ownership Linkages for International Stock Returns?

This working paper was written by Söhnke M. Bartram (Warwick University), John Griffin (University of Texas at Austin) and David T. Ng (Cornell University).

We develop a simple measure of international ownership linkages and show that this measure is of similar importance as the traditional effects coming from country and industry fundamentals. International ownership linkages are not explained by omitted country/industry variations, wealth effects or other explanations like liquidity, investment style, or fund flows. We find that ownership linkage is a summary measure of investment locale that links investor capital around the world. Beyond the level of foreign ownership, the specific ownership composition of a stock is an important facet of international equity returns – a finding which has important implications for diversification.

Keywords: Institutional Ownership, Asset Management, Portfolio Diversification, International Finance, Comovement

JEL Classification: G3, F4, F3

Suggested Citation: Suggested Citation

Institute for Monetary and Financial Research, Hong Kong, How Important are Foreign Ownership Linkages for International Stock Returns? (May 29, 2012). Review of Financial Studies, Vol. 28 (11), November 2015, 3036–3072., Hong Kong Institute for Monetary and Financial Research (HKIMR) Research Paper WP No. 12/2012, WBS Finance Group Research Paper No. 181, Available at SSRN: https://ssrn.com/abstract=2069678 or http://dx.doi.org/10.2139/ssrn.2069678