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How Important are Foreign Ownership Linkages for International Stock Returns?

Author Info

Listed author(s):
  • Sohnke M. Bartram

    (Warwick University)

  • John Griffin

    (University of Texas at Austin)

  • David T. Ng

    (Cornell University and Hong Kong Institute for Monetary Research)

Abstract

We develop a simple measure of international ownership linkages and show that this measure is of similar importance as the traditional effects coming from country and industry fundamentals. International ownership linkages are not explained by omitted country/industry variations, wealth effects or other explanations like liquidity, investment style, or fund flows. We find that ownership linkages are a summary measure of investment locale that links investor capital around the world. Beyond the level of foreign ownership, the specific ownership composition of a stock is an important facet of international equity returns - a finding which has important implications for diversification.

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Paper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 122012.

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Length: 86 pages
Date of creation: May 2012
Handle: RePEc:hkm:wpaper:122012
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Keywords: Institutional Ownership; Asset Management; Portfolio Diversification; International Finance; Comovement;

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Find related papers by JEL classification:
  • G3 - Financial Economics - - Corporate Finance and Governance
  • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
  • F3 - International Economics - - International Finance

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Cited by:

  1. Petzev, Ivan & Schrimpf, Andreas & Wagner, Alexander F, 2015. "Has the Pricing of Stocks Become More Global?," CEPR Discussion Papers 10966, C.E.P.R. Discussion Papers.
  2. Itzhak Ben-DAVID & Francesco A. FRANZONI & Rabih MOUSSAWI & John SEDUNOV III, 2015. "The Granular Nature of Large Institutional Investors," Swiss Finance Institute Research Paper Series 15-67, Swiss Finance Institute, revised Apr 2016.
  3. Sebnem Kalemli-Ozcan & Elias Papaioannou & José-Luis Peydró, 2013. "Financial Regulation, Financial Globalization, and the Synchronization of Economic Activity," Journal of Finance, American Finance Association, vol. 68(3), pages 1179-1228, 06.
  4. Baltzer, Markus & Stolper, Oscar & Walter, Andreas, 2013. "Is local bias a cross-border phenomenon? Evidence from individual investors’ international asset allocation," Journal of Banking & Finance, Elsevier, vol. 37(8), pages 2823-2835.
  5. Edmans, Alex & Levit, Doron & Reilly, Devin, 2014. "Governance and Comovement Under Common Ownership," CEPR Discussion Papers 10119, C.E.P.R. Discussion Papers.
  6. Edmans, Alex & Holderness, Clifford, 2016. "Blockholders: A Survey of Theory and Evidence," CEPR Discussion Papers 11442, C.E.P.R. Discussion Papers.
  7. Karen K. Lewis & Sandy Lai, 2012. "Are the Gains from Foreign Diversification Diminishing? Assessing the Impact with Cross-listed Stocks," NBER Working Papers 18627, National Bureau of Economic Research, Inc.
  8. Albuquerque, Rui & Ramadorai, Tarun & Watugala, Sumudu W., 2015. "Trade credit and cross-country predictable firm returns," Journal of Financial Economics, Elsevier, vol. 115(3), pages 592-613.
  9. Hau, Harald & Lai, Sandy, 2016. "Asset allocation and monetary policy: Evidence from the eurozone," Journal of Financial Economics, Elsevier, vol. 120(2), pages 309-329.
  10. Harald HAU & Sandy LAI, "undated". "The Role of Equity Funds in the Financial Crisis Propagation," Swiss Finance Institute Research Paper Series 11-35, Swiss Finance Institute.
  11. Jin, Dawei & Wang, Haizhi & Wang, Peng & Yin, Desheng, 2016. "Social trust and foreign ownership: Evidence from qualified foreign institutional investors in China," Journal of Financial Stability, Elsevier, vol. 23(C), pages 1-14.
  12. Clemens Sialm & Zheng Sun & Lu Zheng, 2013. "Home Bias and Local Contagion: Evidence from Funds of Hedge Funds," NBER Working Papers 19570, National Bureau of Economic Research, Inc.

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