The Multinational Return Premium: Investor's Perspective

64 Pages Posted: 13 Jan 2017 Last revised: 11 Apr 2017

See all articles by Yeejin Jang

Yeejin Jang

UNSW Australia Business School, School of Banking and Finance

Xue Wang

Nankai University - School of Finance

Xiaoyan Zhang

Tsinghua University - PBC School of Finance

Date Written: April 10, 2017

Abstract

Using monthly returns of 18,996 U.S. stocks over 1973-2015 and 23,965 stocks in 22 countries over 1990-2015, we find that multinational companies earn significantly higher monthly returns than domestic companies by 23bps per month. We further investigate whether the return difference is driven by risk factors or known asset-pricing anomalies, and we find that none of them can fully explain the return premium of multinationals. The magnitude of the multinational return premium depends on the location of foreign operations. The return premium is more prominent for multinationals operating in countries with lower GDP growth, lower private credit, lower R&D export, higher labor cost, and greater geographic distance.

Keywords: multinational companies, international diversification, returns

JEL Classification: G11, G12, G15

Suggested Citation

Jang, Yeejin and Wang, Xue and Zhang, Xiaoyan, The Multinational Return Premium: Investor's Perspective (April 10, 2017). Available at SSRN: https://ssrn.com/abstract=2897600 or http://dx.doi.org/10.2139/ssrn.2897600

Yeejin Jang (Contact Author)

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

Xue Wang

Nankai University - School of Finance ( email )

38 Tongyan Road, Jinnan District
Tianjin, Tianjin 300350
China

Xiaoyan Zhang

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

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