While international trade has become increasingly important over the years, little is known about the role of trade linkages in predicting future equity returns. In this paper, I test whether crosspredictability exists among trade-linked industries across international borders, and explore
possible explanations. I find strong evidence of cross-border stock return predictability among trade-linked industries. A trading strategy of buying industry portfolios whose trade-linked industry had high returns, and shorting industry portfolios whose trade-linked industry had low
returns, yields an annualized return of 12%. Such returns cannot be explained by known risk factors and are different from industry momentum. I find some evidence against the leading explanation, which posits information segmentation as the only reason for cross-predictability, and find support for illiquidity as a new channel of explanation.
자료실
자료실
[2014년 제 4차] Trade Linkage and Cross-country Stock Return Predic
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2014-12-12