Does Foreign Information Predict the Returns of Multinational Firms Worldwide?
Christian Finke and
Review of Finance, 2017, vol. 21, issue 6, 2199-2248
We investigate whether value-relevant foreign information only gradually dilutes into stock prices of multinational firms worldwide. Using an international sample of firms from twenty-two 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 to foreign information being the main driver of this effect worldwide.
Keywords: Foreign information; Return predictability; Limited attention (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 (search for similar items in EconPapers)
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