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

49 Pages Posted: 7 Nov 2019

See all articles by Nicole Branger

Nicole Branger

University of Muenster - Finance Center Muenster

René Marian Flacke

University of Muenster - Finance Center Muenster

Steffen Windmueller

Technical University of Munich - School of Management

Date Written: October 28, 2019

Abstract

This paper studies how upstreamness and downstreamness affect industry returns in global value chains. Up- and downstreamness measure the average distance from final consumption and primary inputs, respectively, and are computed from world input-output tables. We show that downstreamness is a key driver of expected returns around the globe, whereas upstreamness is not. Industries that are farthest away from primary inputs earn approximately 5% higher returns per year than industries that are closest. The effect is found within countries and business sectors and suggests that investors perceive supplier-dependence in global value chains as an important source of risk.

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 Windmueller, Steffen, Industry Returns in Global Value Chains: The Role of Upstreamness and Downstreamness (October 28, 2019). 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

Steffen Windmueller (Contact Author)

Technical University of Munich - School of Management ( email )

Arcisstrasse 21
Munich, 80333
Germany

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

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