Risk, Returns, and Multinational Production

Stefania Garetto and Jose Fillat

No 777, 2010 Meeting Papers from Society for Economic Dynamics

Abstract: to risk: following a negative shock, they are reluctant to exit the foreign market because they would forgo the option premium (sunk cost) that they paid to become multinationals. The theory provides a complementary explanation for the cross section of returns by exploiting the production side from an international point of view. We calibrate the model to match U.S. export and FDI dynamics, and use it to explain cross-sectional differences in earnings yields and returns.

Date: 2010
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Related works:
Journal Article: Risk, Returns, and Multinational Production (2015)
Working Paper: Risk, Returns, and Multinational Production (2014)
Working Paper: Risk, returns, and multinational production (2010)
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