Import Competition and the Stock Market Return to Capital
Abstract
We measure the responsiveness of returns to capital invested in six U.S. industries to shocks to the prices of competing import goods. Recognizing that most capital services are not traded on spot rental markets, we treat the intersectoral mobility of capital as the outgrowth of investment behavior. Then the return to capital is realized as an asset return to equity holders. . We model expected returns by CAPM, and relate "excess" returns in a period to unanticipated shocks to the variables that affect current and future profits. We find that positive shocks to import prices cause higher than normal stock market returns in all six industries. The magnitudes of the responses are consistent with the hypothesis that capital is highly sector specific in five of these industries.Download Info
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2420.Length:
Date of creation: Mar 1990
Date of revision:
Handle: RePEc:nbr:nberwo:2420
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Keywords:Other versions of this item:
- Grossman, Gene M & Levinsohn, James A, 1989. "Import Competition and the Stock Market Return to Capital," American Economic Review, American Economic Association, vol. 79(5), pages 1065-87, December.
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Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
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