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Can international supply chain induce a return premium? Evidence from U.S. leading high-technology firms and Taiwan stock market

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  • Tsai, Li-Chuan
  • Zhang, Ruhui
  • Zhao, Cuifang

Abstract

This study aims to explore relationships between return linkages on international supply chain, idiosyncratic volatility and abnormal returns in local markets. Empirically, focusing on the seven top U.S. high-technology firms and local market of their Taiwanese suppliers, we find significant daily return spillovers from U.S. stocks to the suppliers, electronic industry indices, market index, and non-electronic index in Taiwan, possibly resulting from fundamentals connections or investor sentiments diffusion. Furthermore, stocks strongly sensitive to the U.S. stocks, have high idiosyncratic volatility and a return premium. Moreover, we provide an external sensitivity factor for asset pricing in Taiwan.

Suggested Citation

  • Tsai, Li-Chuan & Zhang, Ruhui & Zhao, Cuifang, 2020. "Can international supply chain induce a return premium? Evidence from U.S. leading high-technology firms and Taiwan stock market," Finance Research Letters, Elsevier, vol. 32(C).
    • Handle: RePEc:eee:finlet:v:32:y:2020:i:c:s1544612318306330
    DOI: 10.1016/j.frl.2018.12.036
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