Alliances and Return Predictability
64 Pages Posted: 17 Mar 2014 Last revised: 2 Jan 2017
Date Written: April 22, 2015
Building on the growing literature on inter-firm links and limited attention, we find evidence of return predictability across alliance partners. A long-short portfolio sorted on lagged returns of strategic alliance partners provides a return of 89 basis points per month that is robust to a number of specifications. Investor inattention and limits to arbitrage may be the source of the underreaction of a firm’s returns to that of its partners’.
Keywords: Strategic alliances, Return predictability, Limited attention
JEL Classification: G14, G12, G11
Suggested Citation: Suggested Citation