Alliances and Return Predictability

64 Pages Posted: 17 Mar 2014 Last revised: 2 Jan 2017

See all articles by Jie Cao

Jie Cao

The Chinese University of Hong Kong (CUHK) - CUHK Business School

Tarun Chordia

Emory University - Department of Finance

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Date Written: April 22, 2015

Abstract

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

Cao, Jie and Chordia, Tarun and Lin, Chen, Alliances and Return Predictability (April 22, 2015). Journal of Financial and Quantitative Analysis (JFQA), Vol. 51, 2016. Available at SSRN: https://ssrn.com/abstract=2409609 or http://dx.doi.org/10.2139/ssrn.2409609

Jie Cao

The Chinese University of Hong Kong (CUHK) - CUHK Business School ( email )

Cheng Yu Tung Building
12 Chak Cheung Street
Shatin, NT
Hong Kong
(852) 3943 7757 (Phone)
(852) 2603 6586 (Fax)

HOME PAGE: http://sites.google.com/site/jiejaycao

Tarun Chordia (Contact Author)

Emory University - Department of Finance ( email )

Atlanta, GA 30322-2710
United States
404-727-1620 (Phone)
404-727-5238 (Fax)

Chen Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

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