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Does Foreign Information Predict the Returns of Multinational Firms Worldwide?

Author

Listed:
  • Finke, Christian
  • Weigert, Florian
Abstract
We investigate whether value-relevant foreign information only gradually dilutes into stock prices of multinational firms worldwide. Using an international sample of firms from 22 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 being the main driver of this effect worldwide.

Suggested Citation

  • Finke, Christian & Weigert, Florian, 2015. "Does Foreign Information Predict the Returns of Multinational Firms Worldwide?," Working Papers on Finance 1519, University of St. Gallen, School of Finance, revised Oct 2015.
    • Handle: RePEc:usg:sfwpfi:2015:19
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    File URL: http://ux-tauri.unisg.ch/RePEc/usg/sfwpfi/WPF-1519.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Foreign information; return predictability; limited attention;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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