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Using Equity Market Reactions to Infer Exposure to Trade Liberalization

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  • Andrew N. Greenland
  • Mihai Ion
  • John W. Lopresti
  • Peter K. Schott

Abstract

We develop a new method for identifying firm exposure to changes in policy using asset prices that has several advantages over standard measures: it is natively firm level, it encompasses the net impact of all avenues of exposure, it yields estimates for firms in all sectors of the economy, and it captures aspects of policy change that can be difficult to quantify using standard approaches. We provide guidelines on how our method can be used in a wide range of settings and, applying it to two well-studied US trade liberalizations, find that it offers new insight into those policies’ distributional implications.

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  • Andrew N. Greenland & Mihai Ion & John W. Lopresti & Peter K. Schott, 2020. "Using Equity Market Reactions to Infer Exposure to Trade Liberalization," NBER Working Papers 27510, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:27510
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    Cited by:

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    3. Federico Esposito & Marcelo Bianconi & Marco Sammon, 2020. "Trade Policy Uncertainty and Stock Returns," Discussion Papers Series, Department of Economics, Tufts University 0834, Department of Economics, Tufts University.
    4. Huang, Yi & Lin, Chen & Liu, Sibo & Tang, Heiwai, 2019. "Trade Networks and Firm Value: Evidence from the US-China Trade War," CEPR Discussion Papers 14173, C.E.P.R. Discussion Papers.
    5. Mary Amiti & Sang Hoon Kong & David Weinstein, 2020. "The Effect of the U.S.-China Trade War on U.S. Investment," NBER Working Papers 27114, National Bureau of Economic Research, Inc.
    6. Marcelo Bianconi & Federico Esposito & Marco Sammon, 2019. "Trade Policy Uncertainty and Stock Returns," Discussion Papers Series, Department of Economics, Tufts University 0830, Department of Economics, Tufts University.
    7. Chen, Tao & Gao, Huasheng & Wang, Yuxi, 2021. "Tariff uncertainty and firm innovation: Evidence from the U.S.–China Permanent Normal Trade Relation," Journal of Empirical Finance, Elsevier, vol. 62(C), pages 12-27.

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    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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