Thinking Outside the Borders: Investors' Underreaction to Foreign Operations Information

• 成果类型: Article
• 署名作者: Huang, Xing
• 署名单位: Michigan State University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhv039
• 发表日期: 2015
• 页码: 3109
• 关键词: expected stock returns; cross-section; MARKET-EFFICIENCY; news; attention; momentum; BEHAVIOR; coverage; country; ANALYST

摘要

I use industry-level returns in foreign markets to examine the hypothesis that value-relevant foreign information slowly diffuses into the stock prices of U.S. multinational firms. A trading strategy that exploits foreign information generates abnormal returns of 0.8% monthly. I find that the market responds more slowly in periods with lower media coverage of foreign news and to information from more linguistically and culturally distant countries. These results suggest that both investors' inattention and lack of understanding of foreign information slow the incorporation of new information into prices. I further separate these two mechanisms by examining market responses to earnings surprises.