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The Globalization Risk Premium

Julien Sauvagnat, Barrot, Jean-Noël and Erik Loualiche

No 11733, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We investigate how globalization is reflected in asset prices. We use shipping costs to measure firms’ exposure to globalization. Firms in low shipping cost industries carry a 8 percent risk premium, suggesting that their cash-flows covary negatively with investors’ marginal utility. We find that the premium emanates from the risk of displacement of least efficient firms triggered by import competition. These findings suggest that foreign productivity shocks are associated with times when consumption is dear for investors. We discuss conditions under which a standard model of trade with asset prices can rationalize this puzzle.

JEL-codes: F11 F4 G14 (search for similar items in EconPapers)
Date: 2016-12
New Economics Papers: this item is included in nep-ifn, nep-opm and nep-upt
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Citations: View citations in EconPapers (6) Track citations by RSS feed

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