Does Foreign Information Predict the Returns of Multinational Firms Worldwide?

69 Pages Posted: 22 Sep 2015 Last revised: 28 Nov 2016

See all articles by Christian Finke

Christian Finke

University of St. Gallen - School of Finance

Florian Weigert

University of Neuchatel - Institute of Financial Analysis; University of Cologne - Centre for Financial Research (CFR)

Date Written: October 28, 2016

Abstract

We investigate whether value-relevant foreign information only gradually dilutes into stock prices of multinational firms worldwide. Using an international sample of firms from 22 developed countries, we find that a portfolio strategy based on firms' foreign sales information yields future returns of more than 10% p.a. globally. The return spread due to foreign information is substantial across different geographical regions and cannot be explained by traditional risk factors, firm characteristics, and industry momentum. Our results are in line with limited attention of investors being the main driver of this effect worldwide.

Keywords: Foreign information, return predictability, limited attention

JEL Classification: G12, G14, G15

Suggested Citation

Finke, Christian and Weigert, Florian, Does Foreign Information Predict the Returns of Multinational Firms Worldwide? (October 28, 2016). Review of Finance, Forthcoming; University of St.Gallen, School of Finance Research Paper No. 2015/19. Available at SSRN: https://ssrn.com/abstract=2663268 or http://dx.doi.org/10.2139/ssrn.2663268

Christian Finke

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Florian Weigert (Contact Author)

University of Neuchatel - Institute of Financial Analysis ( email )

Pierre-a-Mazel,7
Neuchatel, CH-2000
Switzerland

University of Cologne - Centre for Financial Research (CFR) ( email )

Albertus-Magnus Platz
Cologne, 50923
Germany

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