Stock Returns in Global Value Chains: The Role of Upstreamness and Downstreamness

74 Pages Posted: 7 Nov 2019 Last revised: 9 Jun 2022

See all articles by Nicole Branger

Nicole Branger

University of Muenster - Finance Center Muenster

René Marian Flacke

University of Muenster - Finance Center Muenster

Paul Meyerhof

University of Muenster - Finance Center Muenster

Steffen Windmüller

Technische Universität München (TUM) - School of Management

Date Written: June 08, 2022

Abstract

We study how upstreamness and downstreamness affect stock returns in global value chains. Up- and downstreamness, which are computed from world input-output tables, measure the average distance from final consumption and primary inputs. We find that downstreamness explains expected returns around the globe, whereas upstreamness does not. Downstreamness captures supply-side risks accumulating along the global value chain. Investors perceive far downstream industries as particularly risky when suppliers have high unionization rates or labor shares.
Additionally, suppliers and customers of far downstream industries are less concentrated and have low market power. These risks translate into elevated input and output price uncertainties for far downstream industries.

Keywords: Asset Pricing, Input Output Table, International Financial Markets, International Trade, Stock Returns, Supply Chain

JEL Classification: D57, F14, G12, G15, L14

Suggested Citation

Branger, Nicole and Flacke, René Marian and Meyerhof, Paul and Windmüller, Steffen, Stock Returns in Global Value Chains: The Role of Upstreamness and Downstreamness (June 08, 2022). Available at SSRN: https://ssrn.com/abstract=3476690 or http://dx.doi.org/10.2139/ssrn.3476690

Nicole Branger

University of Muenster - Finance Center Muenster ( email )

Universitatsstr. 14-16
Muenster, 48143
Germany
+49 251 83 29779 (Phone)
+49 251 83 22867 (Fax)

HOME PAGE: http://www.wiwi.uni-muenster.de/fcm/fcm/das-finance-center/details.php?weobjectID=162

René Marian Flacke

University of Muenster - Finance Center Muenster ( email )

Universitaetsstraße 14-16
Muenster, 48143
Germany

HOME PAGE: http://www.wiwi.uni-muenster.de/fcm/en/the-fcm/lsdfe/team/rene-flacke

Paul Meyerhof (Contact Author)

University of Muenster - Finance Center Muenster ( email )

Schlossplatz 2
Muenster
Germany

Steffen Windmüller

Technische Universität München (TUM) - School of Management ( email )

Arcisstrasse 21
Munich, DE 80333
Germany

HOME PAGE: http://www.fm.wi.tum.de/index.php?id=188

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