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- Title
How Important Are Foreign Ownership Linkages for International Stock Returns?
- Authors
Bartram, Söhnke M.; Griffin, John M.; Lim, Tae-Hoon; Ng, David T.
- Abstract
We derive a foreign ownership return as the weighted average return of foreign stocks that are connected to a stock through common ownership. The foreign ownership return is of similar economic significance as traditional country and industry factors in explaining international stock returns. It is not related to omitted fundamentals or wealth effects but shifts substantially around ADR and index listings when the investor habitat changes. A decomposition shows that the foreign ownership return is driven by active reallocations of global institutions as opposed to fund flows from end investors. Our findings have important implications for international portfolio diversification.
- Subjects
FOREIGN ownership of business enterprises; RATE of return on stocks; STOCK ownership; WEALTH effect (Economics); MATHEMATICAL decomposition; PORTFOLIO diversification; INVESTMENT analysis
- Publication
Review of Financial Studies, 2015, Vol 28, Issue 11, p3036
- ISSN
0893-9454
- Publication type
Article
- DOI
10.1093/rfs/hhv030