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Risk, Returns, and Multinational Production

Author

Listed:
  • Stefania Garetto

    (Boston University)

  • Jose Luis Fillat

    (Federal Reserve Bank of Boston)

Abstract

to risk: following a negative shock, they are reluctant to exit the foreign market because they would forgo the option premium (sunk cost) that they paid to become multinationals. The theory provides a complementary explanation for the cross section of returns by exploiting the production side from an international point of view. We calibrate the model to match U.S. export and FDI dynamics, and use it to explain cross-sectional differences in earnings yields and returns.

Suggested Citation

  • Stefania Garetto & Jose Luis Fillat, 2010. "Risk, Returns, and Multinational Production," 2010 Meeting Papers 777, Society for Economic Dynamics.
  • Handle: RePEc:red:sed010:777
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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